For most businesses, invoices will be issued when a sale is made but the payments will be received much later. Unless there is an automated system in place, what usually happens is that payments will be received but no entry is made to indicate this. The result is that you’ll have some settled invoices indicated as outstanding when this is not the case. Failure to reconcile receivables and payments could cause you problems when you prepare your tax returns.
Lost deductions when preparing returns
A business owner who is engaged full-time managing a business might not have the time to understand all the tax laws and regulations. A business could qualify for deductions that would minimize the company’s tax liability but unless the person preparing such returns is aware of this, the company will end up paying more tax than it should actually pay. That is why it makes sense to outsource the bookkeeping function to a professional accounting firm.