As a business owner, it’s important that you participate in every aspect of your business. However, that does not mean that you are an expert in every field. Business owners can do a great job of strategizing or dealing with clients, but many have great difficulty with accounting.
Financial mistakes can have negative effects: slow growth, adversely affect business profits, clog cash flow, attract unnecessary attention from tax authorities, or adversely affect the reputation of the business with suppliers, customers and employees.
To avoid these unattractive scenarios, here are 10 accounting mistakes business owners often make, and why these mistakes – even if unintentional – can be insignificant. same danger to the business.
1. DELAY IN ACCOUNTING BOOKING AND CONFIGURATION
Small business owners are always short on time, especially when you always have dozens of tasks to deal with right away. All of a sudden, months have gone by and you haven’t done any bookkeeping or business reconciliation, checking statements, bank slips, tax accounts, or accounts. other main. This means that your financial statements and other reports are not up to date; and in the absence of complete and timely information, it is difficult to make sound business decisions.
For example, a decision to spend money with insufficient information can lead to negative balances or reduced profits because of unknown bills. Failure to keep up-to-date financial data can also lead to problems with suppliers due to ignored invoices, make it difficult for you to import more materials, or negatively affect your credit score. business to suppliers.
2. DON’T KNOW HOW TO USE ACCOUNTING SOFTWARE
In the midst of starting a business, some business owners may have neglected to learn how to use the accounting software of their choice. When you don’t know what the software you choose has and can help you, it’s easy to make a mistake or miss out on some useful functions. A non-standard software system setup can also lead to underutilization of the software’s reporting capabilities, resulting in insufficient information being collected, resulting in suboptimal decision making.
3. DO NOT TAKE REPORTS AS TOOLS
An accountant is more than just a tool for entering financial data to fulfill your tax obligations, or to tell you how much money you have in your bank account. Moreover, accounting is an extremely useful mechanism in providing answers to the question of whether a business owner’s strategy is good and effective.
Therefore, it would be a big mistake to not make full use of the business reports that can be obtained from financial data, including the delinquency statement, the delinquent accounts statement, and the financial statements. report on corporate profits. These reports can show where the problem lies, including identifying which customers are behind on payments, thereby managing cash flow. Without these overdue reports, business owners will not know which customers are paying late, and may miss out on customers who are not satisfied with the quality of products/services that the business provides.
4. PERSONAL BUSINESS FINANCE MISTAKES
One of the most common mistakes business owners make is confusing company finances with personal finances. Keep these accounts separate and completely independent from each other, for accurate information on what is used for business and what is for personal use.
For example, the tax office may understand that some meals a month may be business related, but movie tickets or music records shown on the company’s account statements probably won’t. Accepted. Moreover, the business may be affected because some of the company’s money has been taken out for the owner’s personal life instead of being reinvested in the development of the business.
Therefore, it is better to maintain separate accounts, helping the business owner to see his business as a stand-alone entity, rather than an ATM. This, in the long run, will help the company grow and also help the owner have a better income.
5. DO NOT KEEP BILLINGS
Regardless of whether the invoices are electronic or paper, they need to be saved. Invoices are essential for correcting any errors or omissions in the bookkeeping, and they are also extremely useful for calculating deductible expenses and reducing taxes on arrival. settlement time.
More importantly, when the tax authorities check, the vouchers will be proof of the numbers on the financial statements. If invoices are missing, the tax authority may not recognize the deduction of expenses, leading to a higher amount of tax payable, possibly even leading to a penalty.
6. WRONG CALCULATIONS
In the rush to record the books after a long day, calculation errors can easily occur, even when you use automated calculation solutions. Miscalculations can also be the result of entering information into the wrong account, or simply typing it in.
When this error is combined with error #1 above, financial disaster may not be far away, as these miscalculation errors can go unnoticed for months if they are not regularly checked. Suddenly, one calculation error led to a whole host of accounting errors, leading to even bigger problems.
7. ONLY CONCENTRATE ON SHORT TERM
With the myriad of day-to-day tasks of running a business, it’s easy to focus on the short-term and completely forget to envision the future. Accounting, however, is more than just current bookkeeping. Accounting is also a forecast of future growth and a view of the financial risks arising from current financial decisions.
With the need to anticipate the future, there are many issues to consider, including long-term accounting issues and growth opportunities for the company. You should also pay attention to operational issues, such as the need to add accounting staff to ensure the job when the size of the company expands.
8. Hiring Unsuitable Personnel
Whether the accountant is a family member, a new employee in the office, or the business owner himself hires himself to do the accounting work, incompetent personnel will cause problems. The larger financial theme is suboptimal decision making. In fact, trying to save money on hiring an accountant, or wanting to help a loved one, can lead to checks or penalties. Using incompetent personnel can have long-term consequences for your business.
This can happen when hired personnel do not know how to properly classify expenses, do not know how to record them, do not understand tax laws, including what is recognized in business expenses and what is not.
A professional accountant can help business owners avoid these serious mistakes. The rest of the business owner is only to understand the requirements for accounting personnel, in order to be able to recruit the most qualified and suitable people.
9. THINK TECHNOLOGY IS ALWAYS THE SOLUTION
Spending a lot of money to invest in technology is not a surefire way to avoid accounting mistakes. Either way, you still have to know how to use technology properly. Furthermore, not all technology solutions are created equal or are tailored to a particular business.
For example, a small business does not need to invest a lot of money for an expensive management accounting system, but can use a smaller, well-functioning system with simpler financial statements. You can upgrade this system as your business grows. Therefore, you should choose the right technology solution for your unique needs. At this point, good planning, strategic thinking, and a bit of research time will go a long way to ensure that the tech solution doesn’t turn into another financial blunder.
10. DO NOT SEARCH FOR HELP
As a business owner, it can be difficult to admit that you don’t fit into a Superman or Wonder Woman shirt, but there are situations where not seeking professional help is a huge mistake. It’s okay to admit that you’re not an expert in accounting.
Maybe you started your business from an idea or solution that has nothing to do with accounting, and that’s the area you should focus on. With an accounting job, find a professional, let them take care of you invoicing customers and other jobs, helping you to devote yourself fully to the field you have a forte. As your business grows, there will come a time when you will switch from self-employment to hiring.
