3 Accounting Mistakes That Small Business Owners Commonly MakeAccounting can be tedious and when you’re not meticulous, mistakes can happen. When accounting mistakes occur, it can give you an inaccurate view of your company finances that lead to misinformed business decisions. Most importantly, accounting mistakes may have serious financial implications that can prevent your business from growing. The following are three accounting mistakes that new business owners commonly make.
Forgetting to Record Your Cash Expenses
One of the most common mistakes made by business owners is forgetting to record their cash expenses. It is crucial that all expenses are recorded so that when it comes to pay your company’s taxes, it can be subtracted from the total income. Being able to properly track your expenses will give you a better understanding of where your money is being spent. When a business expense is paid with a check, wire transfer, debit card, or credit card, there are records of the payment being made. However, when a business expense is paid with cash, most business owners forget to note these expenses and forget them later on. Remember to record your cash expenses immediately either as a note to yourself or into your accounting software.
Not Keeping Your Business Expense Receipts
When it comes to filing your taxes, many business owners start scrambling to find their business expense receipts. This is a headache for both you and your accountant because it can result in a series of tax, accounting, and cash flow problems. If your expense receipts are not kept, it can be very difficult to keep a track of what a certain charge was for. That is why, it is important to have a receipt or a copy of the bill for every business purchase. By not keeping an actual receipt, you may be asked to pay more on your taxes. Remember to save and organize your receipts monthly and by doing so you’ll save yourself some time and unnecessary frustration.
Not Updating Your Receivables
A business needs incoming cash to keep the business running and growing. Another common mistake that business owners make is not keeping a track of their receivables. When an invoice is issued to a customer, a receivable is recorded, and the customer now owes you money. Your receivables should include the customer’s balance and when the balance is due. When the customer pays, payment should be recorded immediately and the invoice should be marked as paid. However, many business owners make the error of reconciling their records at a later time and are confused to which customer has paid.
This lapse of reconciling customer payments can leave you with a number of customer deposits in your revenue account that doesn’t make sense and a receivables report that isn’t accurate. By not keeping your receivables updated, you could potentially waste time sorting your receivables listing, overpaying on your taxes, and experiencing bad debts. Do yourself a favor by remembering to update your receivables regularly and keep your business finances organized. You can save yourself time by using an online accounting software that accepts online payments, automates your receivables process, gives your customers more convenience, and money in your pockets faster!
This article originally appeared on Servora Blog and has been republished with permission.
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