Many small business owners tend to handle their own accounting and bookkeeping, especially when they’ve just started out. However, keeping track of the finance-side of the business– everything from income to expenses to tax compliance– can be overwhelming.
Mistakes can happen quite easily and can have costly consequences to your business. Below are five of the most common DIY accounting errors that you should avoid.
It takes excellent organisation skills to be able to do your bookkeeping and accounting right. You would need to keep a record of every transaction, keep receipts or digitise them for future reference, calculate taxes accurately, and more. If your records are not kept organised and updated, it is highly likely that you’ll miss something out, which could get you into trouble during the tax season.
No Accounting Schedule
As a business owner, there are surely a lot of other things that you need to attend to and accounting can easily be pushed to the bottom of your seemingly endless To-Do list. Yet, it is extremely important to set an accounting schedule to add your recent income and expenses into your records. If daily updating is not possible, at least dedicate some time once a week to do your accounting.
Regularly check if your bank account reflects the same balance as you record your cash flow and other financial data into your books. If you find a gap, there is likely a mistake somewhere that you need to find or even a fraudulent transaction. Taking immediate action will help you prevent worse problems further down the line.
Failing to Take Into Account Small Transactions
It can be easy to forget about minor transactions such as the office supplies that you picked up on your way to the office or the freebie that you sent a loyal customer. However, no matter how small you think the transaction is, it’s important to keep a record and get a receipt. In case of a tax audit, you will need to be able to present records of ALL business expenses, even these small ones.
Not Backing Up Data and Using an Accounting Software
Imagine if the laptop where you store all your financial data was stolen, lost, or broken beyond repair and you don’t have a back up. You would need to redo everything from scratch, which could be a huge waste of time.
If you’re still using a spreadsheet or paper ledger to keep track of your business finances, you might want to consider upgrading into a cloud-based accounting software such as Xero, QuickBooks, and MYOB. By migrating to the cloud, you will be able to easily back up your accounting data and even access them wherever and whenever you need to.
These cloud-based accounting systems also integrate well with your bank account and other powerful business apps. The results are streamlined processes, less manual work, enhanced efficiencies, and better overall business performance.
Spend Less Time on Your Books and More Time on Your Business
While being aware of these common accounting mistakes could help you avoid them, the most convenient and efficient approach to stay on top of your business finances is still to entrust your accounting to the experts. Our team of experienced accountants can integrate the most suitable cloud accounting software for your business and even train your in-house staff on its proper implementation.
Let us take charge of your books, while you focus on growing your business. Get in touch with us today!