Accounting in any business, let alone small businesses, is one of the most important aspects. That doesn’t mean simply keeping the books for tax purposes. It means identifying waste, theft, and fraud while saving money.
So, for a small business, it is important to hire professionals instead of taking the books on yourself. Many small businesses make very common accounting mistakes. Thankfully, many of those mistakes are fixable. Here are just a few.
Lack of Organization
Organization is one of the most critical aspects of accounting. Keep receipts from any expenditure, keep the books up-to-date, note petty cash expenses, and do not mix business and personal finances. These seem like simple things, but far too many business owners stray.
The reason for organization is two-fold. For one, you know exactly where your money is going and coming from. Secondly, should there be an audit, you can point to every single receipt. When you have receipts for each expense, auditors are far less likely to actually challenge them.
Falling Behind on Paperwork
Small businesses that wear too many hats will frequently let the books fall behind. End of the week, end of the month, and sometimes later in some cases. That is a risky strategy that can lead to falling behind on financial statements, bill payments, and even billing customers for what they owe.
Falling behind on paperwork can have far-reaching impacts. It can lead to disorganization and even cost a company money if they delay their billing. Worst of all, there could be penalties and interest if reports or taxes are filed late.
The Wrong Staff
One of the biggest misconceptions that small businesses have is that they have to cut corners to save money. So, that usually leads to someone on the staff who has no experience getting stuck with the accounting duties.
But using the wrong staff can be just as disastrous as the above points. Bring in someone who can do the job. It may cost a little more, but it will definitely save the business in the long-term.