The inability, and sometimes unwillingness, of many SMEs to maintain proper books may lead to substantial difficulties and sometime even failure. There are compelling reasons for businesses to maintain proper records, beyond the obvious: good bookkeeping methods signal a better run business and garner easier finance. Considering the ready availability of options, the time to start minding your books is now.
Many entrepreneurs and small business owners spend numerous hours thinking about their business strategies but not enough time on their bookkeeping, placing it low on their priority list. A lot of SMEs simply embrace the “shoebox approach” for record keeping, recording sales and purchase transactions on pieces of paper and then storing them in a shoebox
But as the saying goes, “if you can’t’ measure it, you can’t manage it”. Bookkeeping gives businesses visibility on their cash flow, allowing them to better plan for purchases and other costs, making it easier to forecast business needs ahead of time. It also helps businesses meet deadlines for payments such as rent, salaries, bills and loans.
In fact no business will stand the test of time without good bookkeeping. Clear books are an essential tool to gauging performance, offering a clear indicator of success, growth, decline or stagnation. SMEs can better adapt their strategies to changing dynamics and can make the necessary adjustments to turn things around or focus on areas that are growing to capitalise on opportunities.
Good bookkeeping practices are also an early warning system, alerting businesses of looming issues like rising costs for products or equipment or unpaid invoices before they damage the business. Effective record management also provides protection against threats such as internal theft or dishonest employees by revealing fraud, wastage and record keeping errors. Additionally, they allow businesses to track money transactions and determine if there are any discrepancies that need to be rectified. It should come as no surprise then that a lack of proper record management contributes to the failure of many SMEs.
Clear record keeping also facilitates sound, informed decisions when it comes to increasing headcount. It shows clearly whether a business can withstand the additional costs of new employees and labour. By providing a background picture, bookkeeping also helps SMEs spot trends and patterns, allowing them to forecast their future and set goals and projections.
There is one crucial benefit of good bookkeeping that is often overlooked: beyond providing accurate information for making good decisions, proper bookkeeping is a calling card that says you are a serious business. The ability to present records that are in good order conveys a strong signal that your business is well-run and that you are likely a reliable partner to other businesses, organizations and investors seeking to do business with you. Proper records will make potential financiers and partners more confident when deciding to engage with a business and would make a potential acquirer feel more confident in their purchase.
In fact, bookkeeping is so vital for SMEs seeking funds, that it can make the difference between garnering the funds to grow and being rejected. The ability to present audited financial statements for use by management, banks and prospective creditors, will make a strong case for an overdraft, a loan or flexible financing and credit terms.
Beehive looks closely at the financial records of SMEs seeking finance. We look at a range of variables that determine the credit risk of a business, and we rely heavily on documentation produced with reliable bookkeeping. An SME’s ability to produce such records means that the business is serious and committed to success, and is a reliable borrower. It also indicates that the business is well-managed, organised and has nothing to hide.
To help SME’s build their books better, Beehive has entered into a cooperation agreement with UHY Saxena, a member of UHY International’s network of independent accounting firms with offices across more than 89 countries, to give SMEs access to world-class, professional accounting that they would not normally afford. UHY Saxena offers SME’s that are looking for finance through Beehive a cost effective way to obtain the required audited financial reporting at significantly reduced rates. SME’s that have not maintained good financial records in the past, can also use this option to gain a better understanding of their financial strength and open a new avenue for financing their growth.
Now is the time to take those receipts out of shoeboxes and wear your accounts with pride.