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Newly established businesses can run into a lot of mistakes particularly in accounting which can be expensive for the company. Avoiding them by learning from professional accountants can give business-owners a head-start.
According to expert accountants from the FreshBooks Accountant Network, the most common accounting mistakes committed by small enterprises are the following:
1. Fumbling with Receivables
Getting money into your business is definitely good. However, it Is not enough that you receive payment; you have to reconcile your invoices (records of who owes you how much) with your customer deposits or payments. Leaving them unreconciled will result in so much waste of manpower hours. A regular monthly process to avoid this mistake will save any company time and money in the long run.
A good way of easing up your accounting work is to receive payments online. You can also use cloud accounting software to automate and facilitate your work.
2. Failing to keep Expenses Receipts
Not keeping copies of business expense receipts can produce problems in tax, accounting and cash flow computations. Not knowing specific expenses in your bank account statement can result in high tax payments and other problems if ever you are audited.
The solution is easy: Keep your receipts. How do you do it?
- Use your business or credit card for business expenses
- Collect all your receipts in a bag or a box.
- Do a weekly or monthly filing of the receipts in your tax folder or keep digital copies.
The best tip, of course, is to add all those expenses as you incur them. You can use accounting software to make the task faster and simpler with the use of a smartphone.
3. Failing to Keep Cash Expense Records
Accounting is all about knowing what goes in and what goes out. Hence, not keeping records of your expenses is like going to war without counting your troops, not to mention those of the enemies. This holds true especially to cash expenses since other payments, such as those made through credit cards, debit cards or checks, are reflected somewhere in your bank account. Again, there are apps the business-owner can use with their smartphone so that they can keep track of those cash payments. But it all starts with asking for a receipt each time you make a cash-payment.
4. Failing to Connect with Your Account
Often accountants use jargon or technical terms the ordinary small-business owner cannot understand or does not have any idea how they affect the business. It is assumed that hiring an accountant means getting information or advice that is translatable into layman’s terms so that any business-owner can make the necessary steps to translate the technical knowledge into practicable measures.
Financial professionals can communicate with their own kind, but not with the rest of humanity. Make sure your accountant understands this problem.
These actually seem like easy problems to recognize in the daily operations of any business venture; but, as with so many other things, the easy tasks are the most neglected or taken for granted. If you wish to succeed in your business and keep your shirt on your back, you cannot afford to leave these areas unattended.