Accounting For Small Business - The 6 Most Common Mistakes and How You Can Avoid Them

 
As a small business owner, you will always have plenty on your plate and very little time to spare. Nevertheless, there are some things that you must get right. Here are 6 of the most common mistakes that business owners make and how you can one of the few that avoid them.

Accounting for small business mistake #1: not getting the right accountant for your requirements.

In a start-up small-business, money will be tight and you will be looking for ways to minimise your expenses. However don't be tempted to cut corners on your accounting requirements by trying to do it all yourself. Almost as important, don't hire a bookkeeper just because he (or she) is cheap when what you actually need is a professional small business accountant. A good accountant, used appropriately, will add value to your business by helping you to minimise expenses and taxes and maximise your profits.

Accounting for small business mistake #2: misrepresenting your financial affairs.

You may be tempted to adjust your income statement by categorising business expenses as personal expenses so that the bottom line looks good and the bank approves your loan application. You have just broken the law! And, the bank may recall the loan when they find out. The same principle applies to your tax affairs where you could be in even more serious trouble.

Accounting for small business mistake #3: don't dip into the money that you have put by for tax payments.

If money gets really tight, you may be tempted to temporarily borrow the money that you have put by in a separate account to meet your tax bills. Bad mistake! Once you are on the blacklist of the tax authorities, they will hound you for the rest of your life and put every one of your transactions under the microscope.

Accounting for small business mistake #4: not establishing proper accounting procedures and policies.

You don't need to write a book but it does make sense to set out in few brief rules about the policies and procedures for accounting that your business will follow. This is important especially if you have several employees or partners. Everyone concerned including you and your accountant will find life much easier. Ask your accountant to help.

Accounting for small business mistake #5: not using proper software or accounting tools.

Accounting software packages cost little but take all the headache out of your bookkeeping. No longer would you be faced with silly mistakes or accounts that don't balance because of manual systems. It also makes life much easier for your accountant. This is an investment that is well worth your money.

Accounting for small business mistake #6: not creating backups for your accounting data.

It is amazing how many people don't bother to create backups for data especially when all the data is electronic. Your data could get wiped out or corrupted extremely easily and, in the absence of back-up, you could be in real trouble. Another cardinal error is to store your back-up in the same place as the original. Your backup is not of much use if it is destroyed in a fire along with your original data.

Read More: Accounting For Small Business - The 6 Most Common Mistakes and How You Can Avoid Them

As a small business owner, you will always have plenty on your plate and very little time to spare. Nevertheless, there are some things that you must get right. Here are 6 of the most common mistakes that business owners make and how you can one of the few that avoid them.
Accounting for small business mistake #1: not getting the right accountant for your requirements.
In a start-up small-business, money will be tight and you will be looking for ways to minimise your expenses. However don't be tempted to cut corners on your accounting requirements by trying to do it all yourself. Almost as important, don't hire a bookkeeper just because he (or she) is cheap when what you actually need is a professional small business accountant. A good accountant, used appropriately, will add value to your business by helping you to minimise expenses and taxes and maximise your profits.
Accounting for small business mistake #2: misrepresenting your financial affairs.
You may be tempted to adjust your income statement by categorising business expenses as personal expenses so that the bottom line looks good and the bank approves your loan application. You have just broken the law! And, the bank may recall the loan when they find out. The same principle applies to your tax affairs where you could be in even more serious trouble.
Accounting for small business mistake #3: don't dip into the money that you have put by for tax payments.
If money gets really tight, you may be tempted to temporarily borrow the money that you have put by in a separate account to meet your tax bills. Bad mistake! Once you are on the blacklist of the tax authorities, they will hound you for the rest of your life and put every one of your transactions under the microscope.
Accounting for small business mistake #4: not establishing proper accounting procedures and policies.
You don't need to write a book but it does make sense to set out in few brief rules about the policies and procedures for accounting that your business will follow. This is important especially if you have several employees or partners. Everyone concerned including you and your accountant will find life much easier. Ask your accountant to help.
Accounting for small business mistake #5: not using proper software or accounting tools.
Accounting software packages cost little but take all the headache out of your bookkeeping. No longer would you be faced with silly mistakes or accounts that don't balance because of manual systems. It also makes life much easier for your accountant. This is an investment that is well worth your money.
Accounting for small business mistake #6: not creating backups for your accounting data.
It is amazing how many people don't bother to create backups for data especially when all the data is electronic. Your data could get wiped out or corrupted extremely easily and, in the absence of back-up, you could be in real trouble. Another cardinal error is to store your back-up in the same place as the original. Your backup is not of much use if it is destroyed in a fire along with your original data.


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