The Legal Implications of Bookkeeping
By Nina Kaufman, Esq.Aside from the “two sets of books” scenario that provides the fodder for tabloid headlines and old movies, I tend to think of bookkeeping as, well, mundane (apologies to bookkeepers nationwide as well as to my own, Debbie, who’s a real firecracker). Not something sexy, just something that has to get done. Like brushing your teeth or doing the laundry. Ho hum.
But Lynnea Bylund’s May Intelligence Report made me think differently about it. (Lynnea happens to be co-chair of the President’s Small Business Advisory Council.) Just look at the legal (and other) problems that can emerge because of lack of proper bookkeeping:
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Losing income because you haven’t kept track of who hasn’t paid you.
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Not qualifying for a business loan because you have nonexistent or insufficient financial statements.
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Over-paying taxes due to overlooked deductions.
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Not being able to sell your business because you have no measure of what the business is worth.
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Losing sleep from stress and anxiety.
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Setting prices at a level that you think is profitable, but actually isn’t.
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Getting into trouble with the IRS or state tax agencies because of missed or inaccurate tax payments, or the inability to provide supporting documentation.
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Deciding to rent and signing the lease for a larger office, but not being able to pay the lease after three months because your financial projections were inaccurate.
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Getting into legal trouble because you are paying someone as 1099 contractor when he or she is in actuality an employee.
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Not focusing on the work and growth of a business because you have no system to accurately monitor its financial health.
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Spending nights and weekends trying to manage the books yourself without sufficient training or software.
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Missing opportunities for business growth and development because critical information is missing or inaccurate.
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