Running a business can be a challenging experience, especially when it comes to managing your numbers and staying on top of your financial management.
How about looking ahead now and kick-start good habits for the New Year.
Unless you’ve got some experience in finance, the bookkeeping and accounting requirements can be quite daunting. Even with today’s helpful cloud accounting platforms, there’s always the possibility of making a simple mistake.
So, what are the most common accounting mistakes made by business owners? And what can you do to avoid these pitfalls and keep your finances looking healthy and ship-shape?
The top five accounting mistakes to avoid:-
‘Doing the books’ is unlikely to be your favourite part of running a small business. But the better your accounting know-how and skills, the more oversight you have over the financial path (and future success) of your company. It can be that simple.
But there are plenty of traps you can fall into and a few hurdles that even experienced business owners may trip over from time to time.
Here are five of the most common accounting mistakes:-
- Mixing your personal and business finances – when you don’t separate your personal and business transactions this blurs the lines and makes it difficult to track your income and expenses accurately. It can also lead to personal spending being counted as business deductions, causing tax issues later on.
Solution: Open separate business and personal bank accounts and keep them entirely separate and distinct.
- Skipping the record-keeping process – if you fail to keep receipts, log your invoices and keep proper records this can be a major problem further down the road. Detailed records are crucial for tax filing, budgeting and identifying spending trends.
Solution: keep digital copies of all receipts and be sure to keep your bookkeeping up to date and well-managed.
- Miscategorising your expenses – throwing all your expenses under “miscellaneous” or “ general” makes it far harder to analyse your spending and cashflow. With every item of expenditure logged under a specific code from your Chart of Accounts, you can quickly run reports, review your spending and look at ways to improve budgets and cashflow.
Solution: Categorise your expenses properly (rent, marketing, supplies etc.) to understand where your money goes.
- Winging it – Taxation is complicated and it’s easy to make costly mistakes if you’re not prepared and organised. Don’t wait until tax season to sort everything out and make sure you’re aware of all your business tax liabilities.
Solution: Set aside funds for taxes throughout the year, contact us with any queries, and have your records ready to come to us when requested so it is not a mad scramble at year-end.
