Common Accounting Mistakes (and How to Avoid Them)

Posted by on Feb 2, 2016 in Uncategorized | Comments Off on Common Accounting Mistakes (and How to Avoid Them)

Business owners have a lot on their plate. Between juggling their employees schedules and trying to grow a new company, it’s understandable that some things get swept under the rug. One area any business owner can never afford to make mistakes, however, is in the accounting department. A simple mistake there could spell financial ruin for the whole company. But it’s not all doom and gloom! I’m going to tell you about some of the most common accounting errors business owners make- and teach you how to avoid them.

accounting mistakes

 

Struggling with Complicated Accounting Software

I’m not going to lie to you, some of the accounting software out there is downright confusing, even for me. A lot of it seems to be overly complicated, especially for a small business owner without a solid background in accounting. It’s important to choose an accounting software that meets your company’s needs and is easy to use. You’ll want to invest the time at the beginning to learn how to use the software fully so that you don’t discover later you’ve been entering things incorrectly or missing out on powerful functionality. One program that comes highly recommended for its user friendliness is FreshBooks.

Falling Behind on Entries

Many times, this is a symptom of the first problem, since it’s easy to avoid using software that confuses you. However, in other cases it may be due to neglect or improper time management. Even when it seems like there aren’t enough hours in a day, which it often can for a business owner, it’s important to carve out time to make entries and reconciliations in the book. If you don’t commit to this regular schedule, you may soon find that you’ve gone months without making any new entries and are now working off of inaccurate financial reports. That’s no way to make sound business decisions. My recommendation is to pick a day, any day, and when you come into the office on that day, make it your mission to get current on the books, first thing. Make it a habit and you’ll be in a much better position with minimal effort.

Mixing Business and Personal…Finances

This is a big no no, but you may be surprised at just how often it happens. Keeping separate accounts for your business expenses and your personal expenses can help you get a better look at both. Seeing clearly how much money goes in and out of your business can give you the information necessary to make the best business decisions, whether that be adjusting expenses or settling on a solid amount to reinvest into growing your business.

Getting Rid of Receipts

Just like your mother always told you, you need to keep receipts. This doesn’t have to mean rows and rows of filing cabinets, though. Keep your physical receipts for business purchases just long enough to digitise them and add them to your official accounting records.  These receipts can help you manage your deductions at tax time and protect you in the case of an audit, so hold on to them for at least 3 years.

Hiring the Wrong Accountant

Unfortunately, this is a mistake that can cause a huge amount of damage, but can be difficult to detect until it’s too late. To protect yourself as best you can, make sure first that you’re hiring a qualified professional with all necessary certifications. Conduct interviews with any potential hires to make sure they fit well into your company and speak with their former clients if possible to get a feel for their past work.