Common Small Business Accounting Errors and How To Avoid Them

Mistakes in accounting can seriously impact your small business, and that's why you should always hire accountants to manage your financials for you.  However, you can take steps to keep things in order by avoiding the most common errors.  Read on for a few tips on how to keep your books balanced!

Invoices

Each time you issue an invoice to a customer, you record an entry to show that they owe you money.  When you check your accounts, you will see what that customer's outstanding balance is, and each time they make a payment, you check it off as paid. 

If you're busy, it's very easy to neglect keeping these records up to date.  As a consequence, when tax return time arrives, you have a pile of deposits in your revenue account and a balance sheet that doesn't actually balance.  Get into the routine of updating your accounts received files weekly.  This will save you much time, money and headaches in the long run. 

Receipts

Always keep and file your business expense receipts.  There is nothing worse than looking at a bank statement and having no idea what a payment was for.  You are then left guessing at the reason for the expense and potentially misreporting it on your accounts.

Every time you make a business purchase, keep the receipt.  To ease the burden of filing all those little slips of paper, keep an envelope in your briefcase or car and use it specifically for this purpose.  Clip receipts together in date order, and make it a habit to file them away each week in your tax folder.

Cash expenses

If you want to keep a close check on overall profitability during the year and track your expenses accurately, it's vital that you keep track of all your expenses including cash.  If you forget to record cash purchases, you can easily overstate your business income for the year.

Make sure that you always ask for a receipt and keep it with your other paperwork ready to record and file when you return to the office.

Tax self-assessment

Many small business owners try to save money by managing their own tax returns and accounts.  This can be an expensive mistake if you get it wrong and it's often more economical both in terms of time and hassle to hire a professional accountant to do your tax return for you.

Understand accounting jargon

You might be totally fluent in the language of your business, but it's unlikely you'll be equally conversant with accountantese.  Make sure you understand exactly what your financial professional is telling you and if you're not 100 per cent clear, ask. It's fair to say that you are paying him/her to know accounting and taxation strategies and law backwards and to advise you to the best of their ability, but this is of precious little use if you aren't on the same wavelength when it comes to communication.

You can make sure that your business accounts are kept in good order by following the tips given above.  For more advice and information, have a chat with your accounting professional.


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