Accounting plays one of the most important roles in any business. Carefully tracking your cash flow and controlling your income and expenses helps your business grow and become more successful. On the other hand, accounting mistakes and inaccurate financial reports may lead your company into significant difficulties. Here we will provide an overview of the most frequent accounting mistakes in small businesses that pose danger and may even lead to collapse.
Not Tracking Cash Payments
Tracking payments done via bank cards is simple and easy, but cash payments might trip you up. When starting a business, personal investments are usually regarded with lenience, one scrimps on neither time nor money. However, if you don’t have a habit of tracking your cash expenses, such investments might cost you dearly. Most accounting programs allow you to include cash payments, but you should also keep the corresponding receipts. That way, it will be much easier to determine your company’s balance of expenses and income.
Unnecessary Paper Bureaucracy
If you do your bookkeeping in paper form, you are wasting a lot of time. You shouldn’t make your work harder when there are numerous software options, configured especially for small businesses. By automating your accounting, you will not only save many hours of work but will also be able to track your cash flow more easily and increase work efficiency and your company’s profits.
The Desire to Do Everything Yourself
As an owner of a small business, you are probably used to doing a multitude of different jobs that require competence in many different fields. However, you should reconsider whether it’s also worth taking on the accountant’s responsibilities. One tiny mistake, misunderstanding, or simply lack of knowledge on how to behave in a given situation may cost you the success of your business. A hired accountant will help reduce business expenses, so employing them will pay off.
Not Having a Plan B
If you use special software for keeping records of your business finances, you probably think you have nothing to worry about. It is fair to say that you are much more innovative than your competition and have a better-developed business system but don’t relax too much. You have to be sure that, should unexpected circumstances arise, you will be able to continue working smoothly. That is why you should try to keep physical copies of as many documents as possible.
Poor Budget Planning
Good accounting means not only documenting your income and expenses but also planning them. For small businesses, expenses planning is almost equal to drawing up a budget. Therefore it has to be done especially carefully and responsibly. It doesn’t matter what kind of budget you are making, for the whole following year or a single short-term project. You have to make sure you will not exceed your capabilities or unnecessarily waste your company’s funds.
All of the above-mentioned financial accounting mistakes are pretty easy to correct, so if you’ve recognized yourself in any of these examples, it is not too late to draw conclusions and begin working differently. We are sure that by the end of the year you will be glad about the timely changes you have made.