Quite a few accounting mistakes can hinder the growth of your small business and destabilize it. Unfortunately, however, they are common, especially with new or smaller businesses.
small business accounting
Here, we’ll summarize the most common accounting mistakes that experts see in small businesses, and you’ll also find basic guidelines on how to avoid them.
Mistake 1. Failure to issue invoices for payments due on time
Collecting payments is always an exciting part of running a business. What’s not so interesting is keeping track of accounts receivable.
When a proforma invoice is issued, a claim for a certain amount is reported, which means that the customer owes you money.
It is of key importance to be aware of the amounts due from your customers. As soon as payment is received from a customer, an original invoice must be issued to record the amount as paid. In theory this seems very easy, but in practice, however, invoices are left for later because there is never enough time.
When preparing tax returns, you find yourself overwhelmed with a bunch of unaccounted for client payments and an income statement that makes no sense.
What are the consequences? Loss of hours in updating the list of payments, as well as accumulation of bad debts. Applying payments to invoices in a timely manner each month can save you a huge amount of resources in the long run.
Mistake 2. You do not keep information and receipts for expenses incurred
Many business owners fail to keep copies of receipts and information about company expenses, which in turn can lead to a number of tax, accounting and other problems.
How often have you looked at a bank statement and had no idea what an amount was spent on?
Was it for supplies, equipment, a business lunch, or did you mistakenly pay for a personal expense with the card? If you do not have the actual receipt for the payments made, the risk of preparing incorrect reports increases.
How can you solve the receipt problem? Keep receipts for every business expense.
This process can seem very burdensome, so here are some tips to make it easier and faster: only use your business bank or credit card to pay for company expenses; keep an envelope in your purse or car where you can put all your receipts instead of putting them in your pockets, or worse, in the trash can; once a week (or monthly) review the collected notes and store them in a folder specially created for the purpose.
Mistake 3. You don’t count payments made in cash
It is key for every entrepreneur to track all business–related expenses. Thus, they can be deducted from the total amount of income when preparing tax reports.
While credit and debit card payments and those directly from a company account are easily reconciled, expenses paid in cash are often overlooked.
In many cases, some of these costs are not accounted for and forgotten, which can lead to numerous inaccuracies and errors. Therefore, be sure to develop a method to track these monetary expenses.
We at LEAD CONSULT have a team of professionals and we can take care of the impeccable keeping of your accounting!
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