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Focused African-American office manager sitting at cafe table with laptop, reading important documents with puzzled expression and holding head with his hand.
Everybody makes mistakes and that’s pretty normal. However, the mistakes entrepreneurs can make have significant repercussions for a newly developed business, as it has not matured enough to sustain them. When the mistakes are related to taxes, you can get stuck in a long-term trap which is really hard to overcome. This is why it’s important to understand some of the most glaring mistakes so that you can avoid them in the future.

Tax structuring and placing your business at the right location are two of the biggest challenges faced by entrepreneurs. The common mistakes entrepreneurs should avoid at an early stage include keeping a low personal liability and set up costs. That can only happen if your business is in a vicinity that you know a lot about. In many cases, this will be where you live as you are aware of laws and regulations governing businesses in that area. Once entrepreneurs are able to structure and place their business properly, they can invest their time in developing their products and improving their services as there will then be plenty of time for that.

Not Collecting Sales Tax for Online Sales

New business ventures that are related to e-commerce often fall prey to assumptions. They assume that, because of the fact they do not have to pay sales tax for online purchases, they are not supposed to collect it. That is one of the glaring mistakes that entrepreneurs can make. The selling of online products or services is bound to local taxation laws. If the state or city has laws that govern you to collect the sales tax, then you are supposed to collect it and file the returns.

The issue of online sales tax becomes even more complicated with the passage of the Marketplace Fairness Act. According to the act, all non-exempted merchants are supposed to collect taxes from individual customers that are located in the vicinity of the law. E-commerce businesses are thriving in this digital age and the laws which govern these businesses are being optimized by the government to ensure the steady influx of tax from these business ventures. Businesses are bound to abide by these laws and being aware of them is the first step in ensuring their implementation.

Not Keeping Financial Records

Keeping accurate financial records is a tough yet mandatory job for a newly established business venture. Knowing about your financial position is critical to the success of your business as it will keep you out of issues related to taxation.

The initial focus of any new business is to up their sales one way or another and create a solid customer base for their products and services. That makes sense as well because you have ventured into a business from your personal account and your aim is to earn some profit. However, by the end of the year, you are left with a pile of paperwork and taxes that are left unattended because all of your focus has been to increase your sales. In such a scenario, you would either hire an accountant or try to file the tax returns yourself which can turn in to a pretty bad idea.

Some of the most common mistakes entrepreneurs make include the improper handling of receipts and records of the business sales and expenses that could lead to a number of problems. You could overstate your expenses or profits and end up paying higher taxes than otherwise. The point is that, if you are not careful in maintaining proper paperwork for your business on a daily basis, the result might not be in your favor. Apart from that, you would also not have an accurate understanding of the financial standing of your business which is a lot more hazardous than dealing with taxation issues.

How to fix this problem

Everyone makes mistakes, but it is your ability to fix them that makes the difference. Accounting is the basic language of business, however, you do not have to be an accountant to keep track of your financial matters. Hiring a bookkeeper and getting an online software will solve most of your issues related to organizing financial information. You just need to review the numbers on a weekly and monthly basis so that you have a clear picture of what’s going on.

Out of all the mistakes entrepreneurs make, waiting to hire an accountant at the end of a year is one of them. Involving a professional in the process earlier, rather than later, could help you avoid many undesired circumstances related to paying your taxes. Lastly, keep your business books clear of personal expenses, at least for the first year.

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.