Bookkeeping Horror Story – What Happens When You Delay Your Bookkeeping
Here is a quick story about a business owner who learned the hard way that bookkeeping is an important piece of your day-to-day operations.
“It was like an endless snowball of stress, frustration, and fear: New transactions piling up weekly, procrastinating on catch up to focus on new revenue for cash flow — and when finally making time to catch up, being sidetracked by new complexities and nuances that required more research and ledger revisions.” – Dan E.
Dan was having a very hard time getting his books in order for the upcoming tax deadline. The issue was, it wasn’t just one year of taxes he was filing; it was five years.
Like many business owners, Dan didn’t put in the time and effort required for ongoing bookkeeping or on-time tax filings. Understandably, he was busy with more important aspects of the business that needed his focus for his business to survive. Meanwhile, years of bookkeeping work piled up and many tax deadlines were missed. How does someone recover from lapses like these?
Dan spoke with various lawyers and tax professionals to learn what was required of him to clean up his mess. It came down to going back through his bank statements, credit card statements, and invoices to put together the necessary information for complete and accurate books. He started slowly chipping away at it but realized that he needed to put in a substantial amount of hours to get the job done. At the time, it didn’t make sense for him to hire a bookkeeper, so he came to terms with his inevitable fate: he needed to hustle.
“The final week was easily over 100 hours, basically did nothing but sleep, accounting, and a bit of time on my day job; took off a couple of workdays entirely and ran the other days as tight as possible to maximize bookkeeping time. Other catchup phases here and there would be like doing nothing but bookkeeping and sleep over a 3-day weekend. I’d say it took me around 400 hours in total, once you add up all the bits and pieces.”
In the end, Dan was able to complete his bookkeeping cleanup, but not without serious sacrifices. His lessons learned were:
- Complete your bookkeeping and reconciliations on a monthly basis.
- File your taxes on time, but if necessary, make sure to file an extension.
- Utilize a software like QuickBooks Online from the start.
- Run as many transactions as possible through your business bank accounts and cards.
- Organize your incoming and outgoing invoices.
All of this sounds very basic, and it is! It’s one thing to understand this and another to actually put it into practice. I recommend setting aside time every week to work on it or hiring someone else to handle it for you.