Most businesses make accounting mistakes but it does not mean you cannot improve your business. In fact, the more you learn about the most common accounting errors small business owners make the easier it will be to avoid them.
Accounting Mistakes Small Businesses Make:
Simple mathematical errors
Making common errors includes making simple mathematical errors, forgetting to record income and expenses and not properly recording sales and purchases. While doing your everyday shopping, as a small business owner it’s easy to overlook the cash register receipts and other documents that have important information for tax purposes. But it’s important to always use separate receipts for purchases and re-sellable goods. Remember, your accounting records are the proof that your bookkeeping is correct, so it’s imperative to have them clear and accurate.
Accounting mistakes that lead to Tax return errors
If you happen to be running a business of any size then chances are you are going to find yourself needing to file tax returns from time to time. One of the first things you need to do when filing your taxes is go over every financial document in detail to make sure everything is accurate and complete.
Many small business owners may forget to file their income tax returns, especially when they first start out. The income tax return should include a complete list of all of your employees’ income and expenses, as well as a detailed description of your business.
Accounting Mistakes on payroll
Often businesses forget to check their payroll records for accuracy. When you pay your employees, they may not be able to work some days, or they may take on extra work depending on their current workload. For instance, a nurse may miss one day of work due to a sick child or if he has an emergency and has to stay at the hospital a few days. This means you need to keep accurate records in order to ensure that employees are paid the right wages.
Incomplete documentation accounting mistakes
There are many other accounting mistakes small businesses make, and some of these include not doing your bookkeeping right, misfiling your tax returns or not documenting enough accounts receivable {or uncollectible invoices}. If your books are full of errors, then your bookkeeping will fail to keep track of your expenses, and your business won’t operate correctly.
Although most small businesses do not consider this an area of importance, this can cost them dearly in the long run if they continue to make these kinds of mistakes. Accounting errors can cost you business, even if you’re just a mom and pop business and aren’t as large or as established as a multi-national corporation.
When you are running a small business, it’s very important to educate yourself about the most common accounting errors small business owners make and how to avoid them. When you’re a small business owner, you will see that there are plenty of errors to be made and a lot of money to save if you prevent them. Keep in mind that you need to be on top of your books and that you need to make sure your bookkeeping is up to date at all times. The accounting errors you make will not only impact your financial statement but it can affect your business and how the tax authorities perceive you, too.
One mistake small businesses often make is failing to understand the significance of their finances. Small businesses have to understand the basics of accounting, such as the difference between a profit and a loss. Your accounting is your best friend, so you really need to use it for your own benefit and not against your business. The key thing you want to remember is that your finances are extremely important, so don’t take any unnecessary chances.
Another mistake a small business owner can make is assuming that they can get by without being completely accurate with their books and records. If you’re going to be consistent, then you have to do everything that you can to avoid this mistake. For example, make sure that you keep your books in order and don’t miss any payments or invoices, for you and your employees. In addition, be sure that you have all of your financial information ready on your business record keeping system, so that anyone who needs it can find it easily.
While it’s true that there are several things that could go wrong with the way that your business records your finances, you can make some great strides to protect your finances, especially if you have a dedicated accountant. If you have an accountant to help you, then you are in a better position to avoid these mistakes and ensure that everything is properly recorded and accounted for. However, there are a lot of small business owners that are unaware of all of these mistakes. It is therefore crucial to educate yourself about the things you may be making that can be potentially damaging to your business.
