The Risks of Miscalculating Depreciation

Keeping strict guidelines in place for your company’s accounting policies is critical to your bottom line – but unless you have developed a stringent system of accounting audit procedures or go out of your way to deliver extensive training to every bookkeeper you hire, there’s always the risk that those policies won’t be followed to the letter. This is one of the chief concerns that’s leading many business owners to consider outsourcing their bookkeeping needs, and it’s something you should consider as well for the ultimate health of your business.

So what are the risk factors inherent in failing to enforce strict accounting policies? There are plenty, actually – but here’s one example that can bring about significant risk: the miscalculation of depreciation of company assets. Since there are numerous ways to calculate depreciation – including straight-line, units-of-activity, double-declining balance, and sum-of-the-years’-digits – this can lead to a mightily undesirable situation where your financial statements are thrown out of whack by inconsistent calculations. This isn’t illegal – not unless you’re a publicly traded company, that is – but it can impact the opinion of potential investors and lenders, which can in turn stunt company growth.

Need to take out a small business loan to fund expansion? How about attracting big-pocketed investors to help you achieve your dreams of company growth? If your financial statements don’t add up and are pockmarked with errors, you can kiss those dreams goodbye.

When you outsource your bookkeeping needs, you’re essentially turning over control of your accounting to a third party that has clear, concise, and unambiguous accounting policies in place – and that has the resources to perform thorough accounting audit procedures to guarantee consistency. If you want to learn more about the benefits of outsourcing your company’s accounting, in addition to the numerous additional services you’ll have access to when you do, visit AccountingDepartment.com.

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