Many small business owners handle their accounting and bookkeeping, especially when they’ve just started. However, keeping track of the finance side of the business– everything from income to expenses to tax compliance– can be overwhelming.
Mistakes can happen quite easily and can have costly consequences for your business. Below are five of the most common DIY accounting errors you should avoid.
It takes excellent organization skills to do your bookkeeping and accounting right. You need to record every transaction, keep receipts or digitize them for future reference, calculate taxes accurately, and more. If your records are not kept organized and updated, you’ll likely miss something, which could get you into trouble during the tax season.
No Accounting Schedule
As a business owner, there are surely a lot of other things that you need to attend to, and accounting can easily be pushed to the bottom of your seemingly endless To-Do list. Yet, setting an accounting schedule to add your recent income and expenses into your records is extremely important. If daily updating is impossible, at least dedicate some time weekly to do your accounting.
Regularly check if your bank account reflects the same balance as you record your cash flow and other financial data in your books. If you find a gap, there is likely a mistake somewhere that you need to find or even a fraudulent transaction. Taking immediate action will help you prevent worse problems further down the line.
Failing to Take Into Account Small Transactions
It can be easy to forget about minor transactions such as the office supplies you picked up on your way to the office or the freebie you sent a loyal customer. However, no matter how small you think the transaction is, keeping a record and getting a receipt is important. In case of a tax audit, you will need to be able to present records of ALL business expenses, even these small ones.
Not Backing Up Data and Using an Accounting Software
Imagine if the laptop where you store all your financial data was stolen, lost, or broken beyond repair, and you don’t have a backup. You would need to redo everything from scratch, which could be a huge waste of time.
If you’re still using a spreadsheet or paper ledger to keep track of your business finances, you might consider upgrading to cloud-based accounting software such as Xero, QuickBooks, and MYOB. By migrating to the cloud, you can easily back up your accounting data and even access them wherever and whenever you need to.
These cloud-based accounting systems also integrate well with your bank account and other powerful business apps. The results are streamlined processes, less manual work, enhanced efficiencies, and better overall business performance.
Spend Less Time on Your Books and More Time on Your Business
While being aware of these common accounting mistakes could help you avoid them, the most convenient and efficient way to stay on top of your business finances is to entrust your accounting to the experts. Our team of experienced accountants can integrate the most suitable cloud accounting software for your business and even train your in-house staff on its proper implementation.
Let us take charge of your books while you focus on growing your business. Get in touch with us today!