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Businessman being depressed by accounting in his office
Accounting and bookkeeping are the key jobs in any business. Accounting is the systemic and complete recording of financial operations in a business. Business bookkeeping is the recording of financial dealings as a part of the accounting process.

Small business accounting errors range from minor errors to big accounting and bookkeeping errors which cause grave danger to the business. Accounting problems start with irregular bookkeeping and accounting. This will not give a true picture of the business and no good decisions can be made. Entrepreneurs/owners often do not realize that common small business accounting errors are a major threat to the growth of their business in the long run.

Here are some common accounting errors that actually damage the businesses.

NOT USING AN ACCOUNTING SOFTWARE

Manual work is always the toughest and is at risk for errors. A small accounting error can lead to big damage in businesses. Small and medium-sized businesses should use an appropriate accounting software according to the type of business they run. Cloud accounting is an emerging technique in accounting software and has its benefits in small to medium-sized businesses. 

Manual accounting is time-consuming and the chances of errors are much higher. While using an accounting software not only diminishes the chances of errors, the software also take much less time for accounting operations.

Choosing an appropriate software is an important and challenging step in business according to your needs. You should consider its cost, usability, and extra features when choosing a suitable software for your small business.

Features of an accounting software must include

  1. Inventory management
  2. Sales tracking
  3. Contacts management and contact history following
  4. Account to accept credit card payments
  5. Producing invoices
  6. Financial statements, cash flow statements, and balance sheet,
  7. Budget planning
  8. Payroll
  9. Taxation matters

INFREQUENT BOOKKEEPING

Bookkeeping and accounting statements must always be kept up to date in any business. Running behind in bookkeeping and submission of entries of the expenses or sales will not produce an up to date picture of the business and allow you to make timely decisions. It can lead to a negative balance if expenses are made but an income statement is not updated. Invoices that have not yet been paid by the company may go unnoticed and it can lead to a bad reputation for a company. It can end terms with your suppliers. Business growth is ceased or significantly reduced. Not producing financial statements monthly is common in small business accounting problems.

MIXING PERSONAL FINANCES WITH THE BUSINESS ACCOUNTS

  • Business owners combine their personal cash with business expenses. It is of utmost importance to keep the personal finances and the business finances separate. If these two finances are not isolated then it cannot be known what was planned for business and what was consumed personally. The amount of profit that was produced out of the invested capital cannot be assessed properly.
  • A business credit card is operated for personal expenditures during a holiday trip or other payments. Later on, this sum will be funded from the company’s income which is a bad idea.
  • During purchase orders for inventory of the company, procurements are also made for private use.

COVERING SMALL EXPENSES IN A BUSINESS OUT OF POCKET

Business owners take it upon themselves to pay small expenses for the business out of pocket as it saves their time. However, these expenses are not listed in the business bookkeeping. The business looks stronger in income when this accounting error is done. While in reality, the business is not that strong.

INTERESTS ON DEBTS FOR MANAGING PAYROLL

Small to medium-sized businesses get loans at the time of monthly payroll. The income of the business ends up paying back the loans with interests. Sometimes, the debts increase as well as the interest on those debts. Businesses, instead, can get the services of payroll companies to avoid heavy long term loans.

CONCLUSION

Small business accounting errors range from minor errors to big accounting and bookkeeping errors which cause grave danger to the business.Accounting problems start with irregular bookkeeping and not using accounting software.

Check out America's Best Bookkeepers

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

 

Stressed business woman running out of money - stock and market down
Like it or not, accounting is a main contemplation for companies of any magnitude. Thanks to the vast variety of bookkeeping applications obtainable for today’s small and medium-sized businesses, it’s easier than ever to keep a precise record of where your company’s money is going. Though accounting software has made bookkeeping easier for small businesses, it’s also made errors and accounting mistakes—from inaccurately classifying a transaction to doing all accounting yourself which is much more common.

Some accounting mistakes are slight, inconsequential, and—when they’re unsurprisingly detected by someone within your business—easy to correct. But others are more severe and could have a substantial consequence over your company’s financial health. Over time, poor accounting practices can falsify the genuineness of your business’s economic health. In severe circumstances, recurrent bookkeeping  mistakes and bad accounting practices can lead your business to bankruptcy or company failure.

Here, we will discuss the most typical small business accounting errors that can produce problems, both small and important, for your business.

Data entry errors

Some accounting methods are more trustworthy than others – you could use:

a)   An elaborate automated database

b)   An Excel worksheet

c)    A handwritten record book

No matter what method you use, attention to detail is vital. The most typical data entry error is caused be transposition: keying in 85 instead of 58. Less common are transcription errors, or simply striking the wrong key by fault. These mistakes often go unobserved because the individual entering the numbers is in haste. Consecrating adequate, distraction-free time to the job will lower the prospective for costly blunders.

Not taking accounting seriously enough

The key to operational accounting is recording everything. From small transactions to large expenses for customers and clients, it’s essential to ensure that everything is logged and properly classified in your accounts.

No matter how small your business might be, taking bookkeeping seriously gives you a precise, consistent picture of your corporation’s health, allowing you to regulate exactly how well (or poorly) you’ve achieved your goals in a given period.

Managing all of your accounting in-house

When you run a small industry with limited income, it can be alluring to lower expenses by handling your bookkeeping on your own.While taking care of your accounting yourself might seem like a great way to save cash, it could actually be costing your company money. An accountant will have greater charges than managing your accounts by yourself, but will also save you money.

Failing to reconcile books with bank accounts

It’s imperative that your company merges its accounts regularly. Reconciling is the procedure of inspecting that an account balance as listed on your books is exact and accurate, confirming that it equals the real balance of your bank account.

Forgetting to record small transactions

By keeping a record of small transactions, you’ll be able to easily manage your books as your company grows in size and its number of transactions increases.

Poor communication with your accountant

It’s important to clearly communicate with your bookkeeper. Keeping a paper record of all transactions, whether the record is digitized or otherwise, makes it easier to monitor all of your income and spending.

Not allocating clear budgets to each development

Going into a venture without any clue of how much it could end up costing your business is an easy way to end up out laying far more than you planned. Failing to effectually budget also makes it problematic for you to rein in a venture that has clearly cost you more than it should have. This can cause your business to expend its limited funds on developments that won’t produce a return on investment.

Final Note

The best way to prevent these kinds of errors is to create an organization system that keeps everything in order. Avoiding accounting errors are nowhere nearly as difficult as it may seem. It simply takes a skilled hand and a careful approach. Double and even triple-checking your work is always a good idea before committing it to your archives.

Check out America's Best Bookkeepers

About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.