According to Accounting Experts
Mistakes in accounting can impede the growth of any business and put it on rocky ground. Unfortunately, it is all too common to see mistakes made, especially for businesses that are new or young. Fortunately accounting experts agree on the top five mistakes that are commonly made by small businesses and how to avoid them.
1. Forgetting to Record Cash Expenses:
Accounting experts come together on how crucial it is for entrepreneurs to track every expense relating to running a small business. Throughout the year it is easier to get a sense of profitability overall if each expense has been documented. They are also needed come tax time. While checks from the business account, debit cards, and credit cards are easily linked into accounting software, expenses paid in cash can easily be overlooked. This can result in income being overstated at the end of the year. Enter cash expenses into accounting software as soon as they occur to avoid errors.
2. Not Entering Receivables as They Occur:
Getting paid is wonderful and exciting. Keeping track of these payments? Not so much. Each time an invoice is issued it causes a receivable to be recorded in your system. Many accounting experts advise their clients to apply any payments received to the invoice as soon as possible. With too few hours in each workday, many deposits often get left to be reconciled at a later date. This practice will cause undue stress at tax time because receivable reports do not add up and revenue accounts show a bunch of deposits from customers. To avoid this, simply keep an eye on your receivables and make it a point to reconcile them at least once per month.
3. Not Keeping Expense Receipts:
A large number of business owners fail to save receipts for business expenses, potentially resulting in cash flow, accounting, and tax problems. Bank statements will only tell you the amount that has been spent, not what it was spent on. Keep a copy of every receipt that relates to your business is the advice of accounting experts. To make this less time consuming, pay for expenses using only one credit or bank card. Keep an envelope handy to store receipts on the go. Go through the envelope once per week and file them properly.
4. Not Hiring Accounting Experts to Do Taxes:
A usual way many business owners attempt to save money is by trying to do taxes on their own. The reality is that this can cost you big down the road. Hiring a professional who knows what they are doing will ensure that the right tactics are applied for the financial situation of your company. The success of your small business depends on the organization and accuracy of financial paperwork so don’t take any chances.
