Six Bookkeeping Issues That Challenge Small Businesses

• Reading Time: 3 Minutes
• Published: October 27, 2020
• Last Updated: March 5, 2025

Business Managers, especially those of small companies, don many hats. Because of this, bookkeeping and accounting tasks are often neglected. This can snowball into major problems in the future.

It is recommended that such issues must be addressed soon enough before the business goes bust. The following are major bookkeeping and accounting challenges and their solutions:

Maintaining financial records

One of the top bookkeeping issues business owners face is staying updated with transactions conducted to permit the timely formulation of financial reports for making decisions to enforce or alter business strategy when required.

The solution to this issue is to implement an effective system to record transactions. This may involve the implementation of automation or outsourcing of bookkeeping functions to reliable professionals.

Unsuitable bookkeeping

Even as a start-up business begins to grow, it may not be enough to ensure completion of accounting tasks and maintaining records of expenses. For keeping up with growth, systems may be required to stay updated with numbers. For this, merely using business accounting software might not be sufficient.

For the sustainability of the business, the solution is to put in place self-sufficient and efficient accounting systems. They must offer timely figures and data of accounting that reveal the financial health of the company at any given time as well as accounting analytics to aid business decision formulation that is critical.

Lacks basic accounting knowledge

The process of bookkeeping involves the provision of data by organizing and recording financial transactions like business income and expenses. The quality of information about the business will be impacted by the accuracy of bookkeeping. Keeping records that are readable, accurate, and complete is a tough task if one does it on one’s own, especially without any basic accounting knowledge.

So, when accounting and bookkeeping seem overwhelming, it is good to employ a professional or outsource the functions to a professional company. They will help with bookkeeping services for small businesses.

Poor management of cash flow

Cash flow is an integral part of any business. Knowledge of what is flowing out and in could impact the life of the business. As per surveys, poor management of cash flow was a major reason for the failure of small businesses. By monitoring cashflow, potential issues can be identified before they snowball into major problems like running short of cash to pay creditors.

Untimely reporting

Most often, it is considered that it is enough to create financial reports on a bi-annual or quarterly basis. But there is a need for monthly reports to prove to investors that the business is being monitored closely. When the income statement is not updated, negative balances may manifest when expenses are made. The reputation of the company nosedives when invoices to be paid are neglected. Hence, the solution is to maintain monthly records of business and its financials.

Cyber security

Accounting information is a top target for hackers because of its high value. There are several solutions. Firstly, update accounting software as soon as getting a notification. Secondly, restrict user access to authorized personnel. Thirdly, remove the data no longer needed by the company. Fourthly, move all items to the cloud.

These are some of the issues that businesses face regarding accounting and bookkeeping and some possible solutions.

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