Many small businesses spend approximately
$1000 to $5000
on accounting. But some companies spend way much more than
that. Such businesses often lack accounting systems in place. Or, they don't
pay as much attention to their accounting processes.
If your annual accounting spending is higher than the
average, you might have made the following accounting mistakes.
Failure to Separate Personal and Business Finances
This mistake is prevalent among new entrepreneurs just
starting out. Such business owners often use their personal credit cards or
bank accounts for business transactions. The mistake makes it difficult to
track business expenses and can lead to financial problems in the future.
Suppose you commingle your personal and business finances.
You may not manage to separate the finances when the time comes to file your
taxes, which may lead to an IRS audit. Additionally, you may put your personal
assets at risk if your business is sued.
To avoid these problems, open a separate bank account for
your business and use it exclusively for business transactions. Also, get a
business credit card to help you track expenses.
Failure to Rectify Minor Data Errors
Even the tiniest errors in accounting can potentially cost
you big in the long run. For example, some errors may force you to redo your
entire financial statements, while others may lead to costly penalties and
interest charges. So check out some of the minor accounting errors you
shouldn't ignore.
Data Omission
Data omission happens when you fail to include some crucial
information in your financial statements. For instance, you may forget to
include a vendor invoice in your accounts payable. Consequently, your financial
statements will be inaccurate, which can lead to major problems down the road.
Miscalculation
This error occurs when you compute math incorrectly or use
the wrong formulas. For instance, you may miscalculate your inventory amount,
which can impact your cost of goods sold (COGS) and gross profit margin.
Duplication
Duplication occurs when you enter the same transaction
twice in your accounting records. For example, you may forget that you have
already entered a particular transaction, so you end up recording the
transaction twice.
For instance, you may accidentally record a vendor invoice
twice in your accounts payable. This error can lead to overpayment and cause
cash flow problems for your business.
Failure to Hire a Qualified Accounting Professional
You may think that if you entrust an in-house team or
accounting software to handle your business finances, you will save money.
However, the value you get from an expert accountant is
worth much more than the fee you pay for their services. First, a good
accountant will handle all complex financial tasks such as preparing financial
statements, filing taxes, and auditing. They will also offer valuable insights
to help you make sound business decisions.
Additionally, a good accountant has a solid understanding
of the latest accounting regulations and changes in tax law. This way, they can
help you comply with the law and avoid costly penalties. As such, a qualified
accounting professional is one of the best investments you can make for your
business to save time and money and help you avoid costly mistakes.
To avoid these mentioned mistakes, be more diligent in your
accounting practices and hire a qualified accountant to handle your financial
affairs.
Quality Bookkeeping Services Inc. offers you quality and
affordable accounting services. We have a team of highly trained and
experienced accountants. Trust us to help you save money on accounting while
ensuring compliance with the latest laws and regulations. Contact us
today for a consultation. We look forward to meeting with you soon.
