Most Common Accounting Mistakes for Small Businesses

Most Common Accounting Mistakes for Small Businesses

May,2019 By Smarty Software Knowledge Base

Although accounting software has simplified many accounting and bookkeeping tasks for small businesses, there are still a number of errors and mistakes that you need to be aware of when you are handling your financials on your own.

When running a business, you are supposed to take on many roles, and accounting is definitely the least pleasant one. What is certain, you are smart enough to handle your bookkeeping and accounting as long as you are running your business, but what may cause you to ask yourself why codes do not match?

Undoubtedly accounting is the trickiest daily task of your business, and the thorough accounting will help you be prepared for forthcoming disasters, it will future proof your business, and save your business from insolvency. Despite the fact that hiring an expert will guarantee the soundness of your reports, hiring an accountant costs too much for small business owners and start-ups and on the other hand, relying too much on your accounting software would not solve all your fiscal problems.

Mistakes and errors generally source from:

  1. Mistakes in data entry.
  2. Irregular recording of reports and transactions.
  3. Minor bookkeeping errors which lead to incorrect calculation.
  4. Careless data analysis.
Lack of attention to any of the above-mentioned issues will make you prone to lose track of your financials and keep you away from performing well. Now the question is: how can you sidestep these errors?
The best way is to get to know the errors in order to stay away from the consequences and make a turnback if it happened to you.
  1. Relying too much on your accounting software
Yes, it is true that your accounts software will save loads of your time and money and keep you notified of your financial data, but what you need to know is that there is not a simple way to get away with the right accounting. Even with the best software, the software alone won’t fix accounting problems, you need to have the basic knowledge of accounting and bookkeeping. Bear in mind that you should take advisory and consultation every now and then from an expert, the one who understands the concept of your business and learn how to manage your accounts and categorise them in a way that has the least ambiguity or opacity.
  1. Not paying enough attention to bookkeeping
Not having enough to record the expenses and receipts? Normally business owners struggle with bookkeeping more than any other accounting task. Without precise bookkeeping, you won’t be able to know how your business is doing and make smart business decisions to move forward. Even if you feel like you do not have enough time to do the books on a regular basis, hire an expert. Many businesses prefer to hire an amateur to take care of their bookkeeping as they do not consider it as an essential part of their accounting. By having the right bookkeeping, you will have the opportunity to stay on top of your expenses, large and small. Forgetting to update costs and incomes regularly will put you in a situation that you don’t know which way to go along with.
The expenses might be small to record but after a while, you will notice that a pile of money is gone with no track and you don’t know whether they are in harmony with your budget or not.
Ensure that you record every single transaction from day one. No matter how small it is, as they are going to demonstrate your business’ condition and help you with the future footsteps.
  1. Inaccurate bank reconciliation
Mistakes and errors, which are inevitable parts of data entry, can put the company in serious troubles. When the calculation is not precise, all your reports are influenced. Bank reconciliation is what makes you track the financial situation. In order to make things easier, you will need to make sure that all your transactions are recorded accurately, and on a regular basis.
  1. Not paying attention to the assigned budget
As your business grows, your knowledge in setting a budget for potentially successful projects will grow. Setting a budget at the beginning of a fiscal year or a project will help you cut down on your unnecessary expenditures and generosity. Reaching this limit will cause your company to face more expenses that it should have had.
  1. Analysing reports
A well-balanced analysis comes with thorough planning and consultation. You need to analyse your reports with an accountant to know what do numbers interpret and how to make decisions based on them. True reports do not only include spent and received money, but they also contain the loans and other liabilities and all your business owes. Realistic report of your asset, liabilities and other main parts of your financials guarantee the progress of your business and enable you to take action in this regard.
Now that you know these five main trouble makers, you can ensure your business health and avoid inaccurate financial data. Having these simple accounting issues in mind will keep you from trouble and save you from unpleasant surprises in the future.

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