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Many small businesses spend approximately $1000 to $5000on accounting. But some companies spend way much more than that. Such businesses often lack accounting systems in place. Or, they don't pay as much attention to their accounting processes.
If your annual accounting spending is higher than the average, you might have made the following accounting mistakes.
Failure to Separate Personal and Business Finances
This mistake is prevalent among new entrepreneurs just starting out. Such business owners often use their personal credit cards or bank accounts for business transactions. The mistake makes it difficult to track business expenses and can lead to financial problems in the future.
Suppose you commingle your personal and business finances. You may not manage to separate the finances when the time comes to file your taxes, which may lead to an IRS audit. Additionally, you may put your personal assets at risk if your business is sued.
To avoid these problems, open a separate bank account for your business and use it exclusively for business transactions. Also, get a business credit card to help you track expenses.
Failure to Rectify Minor Data Errors
Even the tiniest errors in accounting can potentially cost you big in the long run. For example, some errors may force you to redo your entire financial statements, while others may lead to costly penalties and interest charges. So check out some of the minor accounting errors you shouldn't ignore.
Data Omission
Data omission happens when you fail to include some crucial information in your financial statements. For instance, you may forget to include a vendor invoice in your accounts payable. Consequently, your financial statements will be inaccurate, which can lead to major problems down the road.
Miscalculation
This error occurs when you compute math incorrectly or use the wrong formulas. For instance, you may miscalculate your inventory amount, which can impact your cost of goods sold (COGS) and gross profit margin.
Duplication
Duplication occurs when you enter the same transaction twice in your accounting records. For example, you may forget that you have already entered a particular transaction, so you end up recording the transaction twice.
For instance, you may accidentally record a vendor invoice twice in your accounts payable. This error can lead to overpayment and cause cash flow problems for your business.
Failure to Hire a Qualified Accounting Professional
You may think that if you entrust an in-house team or accounting software to handle your business finances, you will save money.
However, the value you get from an expert accountant is worth much more than the fee you pay for their services. First, a good accountant will handle all complex financial tasks such as preparing financial statements, filing taxes, and auditing. They will also offer valuable insights to help you make sound business decisions.
Additionally, a good accountant has a solid understanding of the latest accounting regulations and changes in tax law. This way, they can help you comply with the law and avoid costly penalties. As such, a qualified accounting professional is one of the best investments you can make for your business to save time and money and help you avoid costly mistakes.
To avoid these mentioned mistakes, be more diligent in your accounting practices and hire a qualified accountant to handle your financial affairs.
Quality Bookkeeping Services Inc. offers you quality and affordable accounting services. We have a team of highly trained and experienced accountants. Trust us to help you save money on accounting while ensuring compliance with the latest laws and regulations. Contact us today for a consultation. We look forward to meeting with you soon.
Quality Bookkeeping Services Inc.
Landfall Executive Suites
1213 Culbreth Drive, Suite 402
Wilmington, NC 28405
Phone: 910-452-0480
Fax: 910-452-0489