Accounting is something that all businesses have to take into consideration, but the number of people who actually enjoying accounting is very small. It’s one of those necessary evils that exists within business, and it’s something you’ll have to take very seriously if you’re considering opening your own small business.
Finances are the backbone of a business, and accounting is how you manage and keep track of where all this money is coming and going. From employee payroll to the cash flow necessary to keep your doors open, it’s all accounting.
Because accounting is so broad and complicated, it’s easy to make some very simple accounting mistakes. We’ve compiled a list of four simple — and common — accounting mistakes you may run across during your time operating within a small business, as well as how to avoid them altogether.
1. Not Looking for Outside Help
If you’re operating a business out of your living room, it may not be necessary to hire an accounting if you or an employee is competent in math and bookkeeping. However, a growing business needs a growing accounting team.
If you have a brick and mortar store, or even a growing online presence, then you need to work with a full-time accountant. Even if you yourself are a full-time accountant working within the business, you need help if you have other delegated duties. As soon as you (or your existing accountant team) feels overwhelmed, it’s time to get outside help.
2. Relying on Automated Statements
Isn’t it great to know that your bank prints out statements with totals for you? While these figures are usually on the money, that doesn’t mean you get to avoid combing through them every once in awhile.
This isn’t just an issue of accounting, either. One of the biggest reasons identity theft perpetrators get away with their thieving ways is that their victim doesn’t look through their bank statements to catch the suspicious charges. The best way to avoid any situation like this is to look through your statements and do some simple math for yourself to make sure everything’s in order.
3. Not Budgeting Everything
Everything that you do within a business needs to be budgeted. From a new product launch to your future equipment orders, budgets are necessary. Why? A budget tells you how much you can reasonably spend. When you guesstimate this number, you’re likely to go over what you can spend, which isn’t good news for your bottom line.
Create a budget that contains an appropriate approximate value. Don’t spend a penny unless you know you have a penny to spend.
4. Getting Rid of Receipts
You may think that paper receipts are useless when you have so many automated forms of bookkeeping these days, but that’s far from the case. Systems fail and records disappear after a while with some financial entities. Paper receipts last for as long as you keep them.
It’s as easy to keep receipts as it is to throw them away. Purchase a multi-pocket accordion folder with labels for different receipt types and use this to store receipts. It’s that simple!
These mistakes may seem obvious, but many small business owners and bookkeepers fall victim to them every single day. Are you guilty of any of these accounting mistakes?