Are you making any of these common small business accounting mistakes? It’s time to get on track for 2019!
While there’s no shortage of accounting software and applications available for small businesses today. But in many cases, the increase in their use is leading to an upsurge in small business accounting mistakes. Why? Because instead of turning to an accounting expert to handle their finances each year, small business owners are often giving it a go on their own with the help of online tools and software.
Of course, accounting software provides a seemingly easier way to manage accounting and bookkeeping. Unfortunately, the convenience of technology can sometimes come at a price for small business accounting. Mistakes are commonplace. Some are minor and easy to correct. Others are major and can negatively impact the financial health of your business. Even small mistakes can add up over time and lead a business toward a state of insolvency.
Here are three of the worst business accounting mistakes in small business and what you can do to avoid similar issues for your own:
Mistake #1: Always Counting Profits as Cash Flow
When your business closes a deal and receives payment, you must take into consideration the cost you will incur to fund the project. You can’t count the full amount of payment as profit. Doing so can lead to a company that appears more robust financially than it truly is.
If it takes you longer than expected to finish the project, you may incur even more costs than you initially anticipated. Avoid counting payment as income until you have completed the project and can be sure it will truly be a profit.
Mistake #2: Just Getting by with Accounting Practices
The key to effective and solid accounting is making sure you record every single transaction immediately. You must properly categorize small and large transactions of all kinds. That way, you will be able to look back and know exactly what took place throughout the year in your business finances.
Procrastinating or not taking the time to categorize assets and liabilities can leave you confused. You may even be unable to get it all together effectively when you need to obtain information at tax time. Plus, in order for your small business remain healthy and grow, having an accurate picture of your organization’s financial health is paramount.
Strive to do a monthly check-in for your financial books and accounts. You might choose to use accounting software and handle your business accounting yourself. But developing a system and routine will help you to stay on track.
Mistake #3: Depending on In-House Accounting
Unlike a large company that has an entire department devoted to accounting, your small business likely can’t afford such a luxury. However, when you manage accounting in-house, it’s risky. You may find the person who does the job isn’t highly qualified and doesn’t know the strategies to save you the most money.
In theory, it may seem like in-house accounting might save you money. But the truth is an expert small business accounting service is worth a lot. A professional accountant can help you to maximize your business finances to receive the most benefit at tax time and promote optimal business growth.
Connect with our team at Incompass Tax, Estate & Business Solutions today to avoid the small business accounting mistakes so many are making. DIY accounting software isn’t enough to help your business grow and stay financially healthy. Call (916) 974-9393 or contact us online now.