7 Business Accounting Mistakes That Could Lead to Disaster
If you’re trying to do what is best for your company, you need to get a serious handle on business accounting.
This might seem like a given, but there are a number of companies that drive their business into the ground by failing to take the proper accounting steps. It’s better to stay ahead of the curve and know what mistakes to avoid so that your small business can grow.
In this regard, consider these points below so you can avoid these mistakes.
1. Failing to Properly Track Labor Costs
No matter what sort of business you operate, you live and die by your workforce. As such, it’s important that you take proper account of the work they put in and the money they’re owed.
This means addressing everything from overtime to paid time off. If you fail to account for labor costs, people will start to get paid late or incorrectly, and this can throw your entire accounting out of whack.
Make sure that you have an accurate payroll system and that you always take the time to ensure that everyone is paid every last dime they are owed — including the IRS.
Paying your employees is one thing, but you’ll also need to withhold federal and state tax from every check so that you are satisfying your tax requirements.
2. Neglecting to Mention Your Cash Purchases
So many business expenses occur any given day. The best thing you can do for yourself is to keep an accurate log of such expenses so you can get write-offs when applicable.
However, while this is very easy to do when you are using a card, it can become a bit dicey if you’re paying for things with cash. Because of this, you will need to log every single cash transaction as it happens so that you don’t forget.
Keep thorough and consistent records so that you have some form of proof if you happen to get audited. When possible, get a receipt and log your receipts so that you are able to get some money back when tax time rolls around.
The more thorough you are with this form of accounting, the better your business will be as a whole.
3. Winging it or Failing to Look at Records
Keeping good records is half the battle when it comes to your accounting needs. However, you also need to make sure that you are regularly referencing and using these records.
You’ll never want to risk winging it or throwing caution to the wind when it comes to your accounting. Instead, give yourself access to the best records around, and be sure that you use them.
If you are properly accounting, these expenses will pile up on you before you know it — to the point that it will be difficult to clean up the records later. It is best to do the little things now and with consistency so that you don’t have to play catchup later.
4. Skipping Basic Accounting Steps
There’s complex business accounting, and then there is basic accounting that every business owner should have access to.
For starters, make sure that you have a budget in place and that you use the budget. You should also keep track of your receivables.
Every business owner should have access to some basic accounting software, and should always back up your information just in case there are any errors or data loss.
The more that you stay on top of your basic accounting, the less likely you are to end up in trouble later because you were skipping steps.
5. Failing to Hire a Business Accounting Professional
Of course, you can always save yourself a lot of heartache by simply hiring an accounting professional. By having access to a professional accountant, it becomes easier for you to get help and to circumvent any problems that might come about.
Be sure to know which questions to ask an accountant before making a hire. This way, you can make sure that the accounting firm is a good fit, and that you also find out how much their services will cost you.
From here, you can breathe a sigh of relief knowing that your accounting is handled.
6. Mismanaging Your Overall Cashflow
The last thing you would ever want your business to be is cash poor. You can handle these challenges better by managing your cash flow accordingly.
You need to be aware of the potential cash flow challenges that all businesses face.
For instance, cash flow problems happen often due to mismanaged receivables, employees and payments, and by biting off more than you can chew with loans. Keep your business as liquid as possible so that it can have financial health for the long run.
What’s more, you should always be stashing aside money for savings. This way, you can use your rainy day fund to right the ship in the event that you hit a financial emergency.
Take the time to also get a handle on your taxes, and always keep clean records so that you can separate business expenses from personal expenses without getting them confused.
The more you plan for the future, the better financial health your business will maintain.
Consider These Accounting Tips
Business accounting is potentially complex but is very necessary for any company. These are the tips that will keep you afloat no matter what kind of business you run.
For accounting help, contact us today.