Bookkeeping and accounting are now very easy for small to medium enterprises and it’s all thanks to the availability of usable software. For years it paved the way for accurate recording of business cash flow. But it is important to talk about the mistakes that can still potentially happen nowadays.
These accounting mistakes can range from small and irrelevant to more serious and significantly impactful to the company’s financial health.
As time passes by these issues are not correct, they later shape the accounting practices until such time that the reality of the business’s fiscal health is already distorted and out of line. Repeated accounting mistakes and bad accounting practices can mislead your business away from growth.
In this article, we’ll discuss some of the most common issues that must be avoided by small businesses and what you should do instead:
In-house Management of All the Accounting
Are you currently handling the rest of your bookkeeping and accounting in-house? You should consider stopping anytime soon if not now. Even if you are running a small company with very limited revenue, it is proven impractical to take care of your accounting alone.
It will seem very cost-efficient at first but eventually, you will realize that it might cost your business more. Realizing how great help an accountant can offer and how much money it can save you will surely change your mind.
What you are actually investing in is the knowledge about tax deductions which is usually not a common thing to know even to many business owners as well as skills in handling and troubleshooting errors that are difficult to see in your own company but easy to spot for an expert.
Not being able to reconcile books with bank accounts
Reconciling accounts is a vital part of any business. It is where the account balance listed in its books is checked for accuracy and correctness. It is vital to ensure that it matches the real balance of the company’s bank accounts.
Without keenness, many costs may go unrecorded and they might be affecting your business without you even noticing it. So, reconciling every account from bank cash to payables is a must for small businesses as it will give a clear vision of one’s financial standing and prevent books from becoming out of sync with the real status of the business’s accounts.
Failing to Record Minor Transactions
Try to randomly check your small transactions and see if everything is being recorded properly. If not, then you must act on it right away because no matter how minor it seems, it’s still important to keep track of everything that involves cash.
Knowing how to properly handle and monitor small transactions will help you a lot in managing bigger ones. As your company grows, the number of transactions will also increase so if you are already used to keeping a record of your minor transactions, then managing your books even when you are bigger won’t be very challenging anymore.
No proper communication between you and your bookkeeper
It’s good if you know everything important about your business. But the question is does your bookkeeper also know what’s going on? Do you properly communicate all your transactions?
Admit it or not, it is wrong not to report mistakes that can cause recurring costs to your bookkeeper. Waiting until it gets bigger and more serious will just put all of you in bigger trouble.
A clear communication line should be established between you and your bookkeeper, this will put both of you on the same page and ensure that you are both keeping track of all transactions. You should also have a recording either on paper or digitized to make it easier for you to monitor all of your income and expenditures.