The Top 5 Most
In the hustle and bustle of life as a small business owner, errors and oversights often stem from the familiar trio: time constraints, financial limitations, and a shortage of support. But let's delve deeper; these slip-ups cost us more than meets the eye such as more debt, disrupted sleep, the looming anxiety of audits, and a lack of personal time for ourselves and our loved ones.
Correcting these mistakes is the catalyst for a renewed sense of focus and untapped resources to propel us toward our goals. They say the first step to recovery is admitting there's a problem, and here's your chance to take that step with us. Dive into the upcoming insights—we've curated simple actionable items.1. You don’t take bookkeeping as seriously as you should.
Recording everything is an excellent rule to follow for bookkeeping and accounting for a small business. Ensuring that everything is recorded and categorized correctly in your accounts is essential, from small transactions like purchasing office supplies to large payments from customers and clients. No matter how small your company is, accurate bookkeeping and accounting methods are essential for a reliable assessment of your company’s health. If you’ve slacked in this area, find the weak spots. For example, you may need to: categorize your assets and liabilities correctly, have a monthly accounts review, or establish a new bookkeeping system.
Action item: A sound bookkeeping and accounting system is the only way to know how your business performs. Start today by taking a test drive in QuickBooks Online. Click here to get started.
2. You refuse to outsource your accounting needs.
If you read point one above and the need to establish a new bookkeeping and accounting system rings true, you’ve identified a serious issue. Many small business owners decide to handle bookkeeping and accounting in-house because they feel “too small” to justify outsourcing those tasks. While the temptation to reduce costs by controlling the books in-house is tempting, it can be overwhelming when trying to manage a business and wear the accountant hat.
Handling your own accounting could be costing you money. Accountants understand ways to save businesses money that can escape others. They know all the ins and outs of taxes, deductions, write-offs, etc. It’s what they do all day, every day.
Action item: Consider outsourcing your accounting to a qualified firm instead of missing out on opportunities to save money.
3. You outsource, but you fail to communicate with your accountant.
So, maybe you have already outsourced your business’s accounting. Are you communicating with your accountant? Does your bookkeeper know what’s happening in your business? Keeping up with all transactions – great or small – and sharing those with your accountant is vital. Overlooking even a small purchase can lead to costly issues over time.
Action Item: A great way to make sure your accountant is fully apprised of any and all expenditures. Keep receipts and a record of all transactions. You can use receipt tracking software or keep a paper or digital log. Regardless of the method, your accountant will appreciate your efforts. Their job will be easier, and it can save you money in the long run.
4. You don’t record every expense, even the small ones.
This point cannot be emphasized enough. It is essential to record all business spending, no matter how insignificant you think. That $5 of petty cash you took out of the register to send your employee to pick up stamps for the business counts! This is particularly crucial for cash-based (i.e., retail) businesses. No expense is insignificant. This is a fundamental rule to follow for new companies. While it is easy to overlook the small stuff, as your business grows, you will be glad you were attentive because it makes managing your books so much easier. Again, this can be a big money-saver in the long run. The bottom line: No transaction is too small to record.
Action item: Save receipts, keep a record, tell your bookkeeper.
5. You assume that profit always equals healthy cash flow.
If you make a sale of $1,000 that cost your business $300, did you profit $700? Not necessarily. Depending on the type of business you are in, additional costs could be associated with the sale that reduces the profit. For example, if you’re in retail sales, you must account for expenditures like overhead. What if the merchandise is returned and refunded? Handling the refund costs you money, and that cuts into profit. Suppose you’re in a business that provides services like construction or home improvements. In that case, you must consider setbacks and delays due to receiving materials, weather, etc. Any setback you experience in completing a job means less profit to your firm.
Not accounting for costly setbacks can give you a false sense of how your business is performing. While the numbers may look good on paper, a distorted picture of its financial health is detrimental to your success.
Action item: Awareness of these small business accounting pitfalls can help you improve in weak areas and position your business for long-term success and a healthy financial future. Speak with an accounting professional to help you identify the pitfalls and give you a plan of action to turn them into true profit.
Contact our accounting professionals now for more help managing your small business finances. Click the Schedule A Consultation button in the right margin for your FREE Consultation