You’ve probably heard the famous quote “Measure a thousand times and cut once.” Accuracy is crucial, and there are merciless consequences when it’s neglected. When we acquire new customers, we often find technical errors and inaccuracies. Our first step when working with new customers is to conduct a diagnostic review to assess the state of the books, identifying what’s correct and incorrect. While some are worse than others, they are rarely in perfect shape. This highlights the alarming ambiguity among those who claim to be accounting professionals. Reports and data are being produced by these so-called professionals, yet the numbers remain unreliable and can’t be trusted. An accurate bookkeeper and a smart Tax Professional are powerful, working together to maintain accountability and precision.

The Impacts of Inaccurate Accounting

The Standard

You might wonder how to ensure business numbers are accurate. There must be a standard that originates from basic accounting principles. Amber’s Accounting and Bookkeeping standard is twofold: financial statements directly from the bank or financial institution and our expertise in QuickBooks Online workflows and methods. The phrase “The bank is the Ultimate Authority” holds true. Without statements, numbers can’t be verified. Reconciling with bank statements is the only way to ensure accurate numbers. Additionally, using QuickBooks Online software correctly is essential for accurate data. Our team of professionals is almost all advanced certified in QuickBooks Online software, ensuring we use it correctly. If data isn’t organized correctly in the software, the reports will be inaccurate. These are our two measuring sticks and standards. Understanding the importance of accuracy and the tools to measure it, let’s explore the key negative impacts of inaccuracy.

Some of the key impacts are as indicated below:

1. Financial Misrepresentation When numbers and data are inputted wrongly into the software and or if the numbers and data are never trued up and reconciled, reports can’t be trusted. Profit margins will be skewed. Cost of Goods Sold KPIs will be inaccurate. The reports will be giving out wrong information. This will mislead business owners regarding the profitability, liquidity, and general financial health of the business.

2. Poor Decision-Making: Owners and managers who wisely rely on accurate financial data for sound decision-making will be affected by inaccurate financial reports. If numbers can’t be trusted and key markers on the financial health of the company are misrepresented, it will cost the business significant pain and expense. Smart strategic decision-making will be compromised for sure.

3. Tax Submissions: The use of poor and incorrect financial records while preparing tax filings, will only lead to under or overpayment of the taxes. Underpayment is subject to legal penalties and interest, and on the other hand, overpayment will tie up valuable cash flow and opportunity.

4. Damage to Credibility: A company can also lose its credibility in the eyes of its investors, lenders, partners, and other stakeholders in case of the discovery of financial misstatements. It may lead to loss and shortage of investor confidence, problems in capital sourcing, and reduction of business opportunities.

5. Audit Failures: Inaccurate accounting may lead to failure in audit cases. Not being able to pass an IRS audit means costly legal and accounting actions, as well as stress and anxiety for the owners.

6. Operational inefficiencies: Inaccurate financial data makes it hard to determine the efficiency of the different business operations; therefore, inefficiencies will continue or worsen, pushing up expenses for the business.

7. Peace Of Mind: Flaws create doubts and a sense of unease. Your mind energy is a very valuable resource and is limited. Peace of mind with accounting and bookkeeping is an investment that brings much freedom, capacity, growth and efficiency.

In summary, the effect of inaccurate accounting is a great financial burden felt not only in the firm’s financial integrity but also in the wide implications that may impact strategic direction and operational effectiveness. What risk is your business willing to take with inaccurate accounting and bookkeeping? Do you want to have confidence and peace of mind?

Neglecting your business’s financial awareness leads to stress and uncertainty but prioritizing it as a foundation of your business will empower you to make the best decisions.

Schedule a free 15 min. Zoom call for accurate accounting!