One challenging aspect of business is keeping the books up to date and getting it right. A simple accounting mistake can seriously damage your business.
Many business owners rely on their accountants in helping their business comply with taxes, payroll, bookkeeping and other accounting issues.
Listed below are some of the accounting mistakes that you must avoid, if you do the accounts yourself, to prevent significant damage to your business.
1. Not prioritising receivables
Undoubtedly, cash flow is the lifeblood of any business. If you are not enough money coming in, you will find yourself going backwards or worse going under.
When an invoice is issued, a receivable is recorded, when the customer pays, the payment is applied and the invoice marked as paid.
Not monitoring who has paid will leave you in a situation where you’re unsure who truly owes you money. After all, making the sale means nothing if you’re not being paid for it.
You need to regularly and systematically monitor who has debts and how old they are. You also then need to regularly request payment when payment is late.
As a result of not properly managing receivables, you may ultimately suffer from high bad debts.
To help avoid this, you may consider investing in a cloud accounting and online payment system. They can automate processing receivables to help you get paid faster.
2. Not keeping track of expenses
Expenses are a necessary part of any business, be it small, medium or large. Unfortunately, many business owners find themselves overwhelmed when it comes to tracking down receipts and other accounting documents.
If you don’t keep supporting expense receipts properly, it can result in cash flow problems, accounting and tax issues.
But saving a receipt for every expense can be cumbersome. This is one of the reasons many business owners today are using cloud accounting and remote bookkeeping organisations to help them in organising business expenses and recording them properly.
3. Not keeping personal and business finances separate
Combining the two can put your business at extraordinary risk. It’s a common mistake that can be easily avoided but there are many small business owners who are still using one account for both their personal and business finances.
This problem can easily get out of hand. Plus, this issue can cause problems with the tax authorities. To avoid it, you should unquestionably have separate bank accounts for your business and personal needs. Keeping things separate ensures that you don’t confuse what belongs to the business and what belongs to you.
4. Not seeking help from a professional
At first, it’s tempting to handle all accounting tasks on your own to try to save money. But, when your business starts growing, not hiring a professional can be a very bad idea.
You may think that you’re saving money by doing your taxes on your own, but, the truth is that this mistake can cost you a lot, further down the road. You might be overpaying tax, which is as good as throwing money away or underpaying your tax bill, which can lead to penalties.
Having a qualified professional taking care of your accounts can save time and money. You can concentrate on your core business and it will take the stress out of accounting.
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