The speed of doing business in today’s world can contribute to business owners taking shortcuts that can cause accounting problems. North County Tax & Accounting in Atascadero, CA has just released a report about the top accounting mistakes and how to avoid making them.
Inaccurate record-keeping
Inaccurate record-keeping is one of the most common mistakes. Mistakes happen but the less accounting structure a business has, the higher the risk for serious errors. Inaccurate record-keeping can result in income loss, inaccurate tax filings and fines and penalties, inaccuracies in payroll, and bills not being paid on time.
The best way to minimize the risk is to start every new business with solid accounting practices. If a business is already operating, it’s critical to make sure that solid accounting practices are in place. The options for starting off on the right foot, or getting an existing business in a solid accounting position is to rely on expert help.
Doing two things as soon as possible can significantly lower the risk of serious accounting errors:
- Hire a part-time bookkeeper or an accounting service that keeps your books accurately, runs payroll, does taxes, and even pays bills and does your invoicing
- Use accounting software. Even if you are using an accounting service, accounting software allows you to log in and generate a variety of reports about the state of your business at any given time.
Not Properly Categorizing Income and Expenses
Income is income and an expense is an expense, right? Not necessarily. Not only is proper categorization necessary when tax time rolls around. it also tells you details about how your business is running so you can make the right adjustments at the right time. When income changes, you need to know why. Is the change connected to a specific product or customer? What is the cause of a sudden increase in expenses? Maybe it’s time to replace an old vehicle or maybe an increase in employee overtime is indicating it’s time to hire additional people.
Operating without a budget
Creating a budget sets reasonable financial goals for growing your business. Budgets help prevent overspending by establishing a picture of income and expenses. One of the main causes of business failure is being undercapitalized, and this can come from not having a budget that provides realistic projections or ignoring the budget. The ability to compare the budget with the business’s actual financial activity and make necessary adjustments is critical to growing a successful business.
Failing to plan for business interruptions
What if a major storm or earthquake shuts down business for a few days or even weeks? What if the computer crashes and all the financial, inventory, and customer data is lost? What if the building burns down?
Business interruption might not seem like an “accounting mistake” but anything that causes financial data to be lost is a problem.
Back up all of your business data on a regular basis. Create a plan that helps you resume business as quickly as possible after a disaster or data loss.
Wearing too many hats
No one person can do everything and business owners who try to save money by doing it all themselves, or putting too much workload on one trusted employee are going to make some serious accounting mistakes along the way.
Outsourcing critical accounting functions to an accounting and tax firm is one way to avoid making serious accounting mistakes. North County Accounting & Accounting has the expertise to help any size business get on solid accounting and financial footing. The services include taxes, tax planning, payroll, accounting and bookkeeping, and Quickbooks Accounting Services.
North County Tax & Accounting accountants have more than 25 years of experience in this business and truly care about client satisfaction.
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