Accounting Mistakes Your Business Should Avoid
If you are a business owner, you may believe handling bookkeeping in-house and with manual processes will save you money, but it could cost you much more over time. The figures fed into it must be accurate for accounting to be accurate. The financial health of your business can be negatively impacted by costly errors, tax errors, cash flow disruptions, and more without professional guidance.
The following are a few accounting mistakes businesses make that can cost them money:
Using software incorrectly
Using accounting software will solve your bookkeeping issues quickly and easily. However, despite the best efforts of your software, you may enter incorrect data or misinterpret the results. In the right hands, high-quality accounting software can be a valuable financial tool, but in the wrong hands, it could expose you to unwelcome risks. Even though the software cannot replace a professional, working with a bookkeeper familiar with your software can lead to much more efficient practices.
Expensing cash without recording it
Businesses must pay attention to cash expenses. However, not recording cash expenses can create a mess when it comes time to file taxes. As a result, cash flow reports for the period when the expenses were incurred will be invalid. Instead, utilize an accounting program that allows you to immediately pair the costs with images by taking a photo and matching them with the expense. Set a time to record receipts weekly if the immediate recording is impossible.
Reconciliation of late receivables
In the same manner as cash expenses, received payments should be reconciled against receivables as soon as possible. It isn’t easy to reconcile your revenue account if this process takes a long time. Only paid invoices could be noticed because of this. You cannot have a clear and accurate view of your current financial situation if you have unreconciled payments. It is possible to make decisions based on false, inflated data without a clear understanding of the business’s cash flow.
Overlap of Finances
The distinction between personal and business finances must be clear to business owners. It increases the risk of accounting errors when personal and business finances overlap. In addition to these risks, outside auditors may conduct financial audits. As a rule of thumb, keeping your personal and business finances separate is best. A start-up, for example, may need help to keep detailed records.
Incorrect or non-use of reports
It could ultimately cost your company if you misuse financial data or misunderstand reports. Reports are powerful tools that enable you to utilize your accounting software to its full potential and portray your business in the best possible light. Keep yourself and other bookkeeping managers in the loop and update the company’s overall status by regularly reporting weekly, monthly, and yearly.
Don’t risk mistakes!
Halsey Resources provides bookkeeping services to small and medium-sized businesses. Our office is located in West Seattle, but we serve clients throughout Washington State. As a business and organization’s bookkeeper and payroll manager, we handle all the tasks associated with these functions for them.
Contact Halsey Resources for assistance from a friendly, knowledgeable professional about outsourcing one or more of your bookkeeping needs.
