Common Small Business Accounting Mistakes
December 18, 2015
Running your own company is full of challenges, some of which will be unforeseen, but keeping the books is definitely one challenge that you can prepare for, and below are 5 ways to avoid the most common accounting mistakes made by small businesses:
Don’t cut corners when hiring in your finance department
One mistake commonly made by many businesses, both big and small, is not investing enough when hiring employees in accounts. A junior finance person will undoubtedly cost you less than a senior one, but can the junior person maximise the financial side of the company and enable it to expand, and will they have the necessary experience to help get your business to where you want it to be?
Don’t be tempted to spend big on accounting software
Some accounting software packages may sound like the perfect solution to all of your businesses accounts needs, but often it isn’t necessary to fork out for expensive software that probably has a lot more functions than you will have use for, particularly if yours is a smaller business. If you are going to invest in accounting software, ensure that it focuses on the areas that are important to your business, like cash flow, compliance and invoicing.
Keep family members away from your accounts
So many times business owners hire members of their family to manage their accounts, and while this may seem like the simplest and cheapest solution, it can often turn out to be a disaster. This is a sure fire way to create arguments and unrest both in the office and at home, so while a professional accountant will cost you more, they will save you a lot of trouble in the long run.
Avoid using a single checking account for business and personal use
It may seem like too much hassle to open separate accounts for your business and personal accounts, but things could quickly become very confusing, especially when entries from one or the other begin to mingle on the company’s books. Putting personal expenses onto your business credit card is a recipe for disaster, and you will end up wondering why it is that your business isn’t making the kind of money you think it ought to be. This will also incite the interest of the IRS when it comes to paying your taxes.
Don’t try and take everything on yourself
When your company is in its initial stages, you may find yourself tackling your own accounts, and this may work well enough to begin with, but as soon as your business begins to expand, you’ll doubtless find yourself in over your head. Hire an accountant and let them handle your finances while you focus on other aspects of your business; if your accounts are running smoothly, the chances are that your business will grow at a far faster rate.
Take heed of these simple tips to avoid making costly errors that could prevent your business from flourishing.