No one’s perfect. At least that’s what people tell us when we commit mistakes. It’s as if every mistake is something we’re programmed to forget, and so we move on with our lives, hide that mistake in the past and hopefully learn from it. But this isn’t what’s going to happen in your small business.
One big mistake, especially in your small business accounting, could create a major tremor that would shake your vulnerable business infrastructure to the ground. It’s frightening to lose something we’re hopeful to scale up. And so to protect your business from losing, here is our list of common small business accounting mistakes to keep in mind.
Not Writing Down Cash Expenses
Cash expenses are maybe the easiest to record and track down, but they’re the ones which are often forgotten. You’ll be having no problem with credit card purchases since they’ll be automatically be linked into your online accounting software.
But cash expenses can greatly affect your overall business profitability. In general, it will be deducted from your total income at taxing period, so make sure to record them to avoid paying more tax. Asking for receipts in every cash purchase for your business is one good method to remember your expenditures.
Not Keeping Receipts
A lot of problems can occur if you fail to keep your receipt in every purchase transaction. For one, you’ll have a problem with your taxation. You’ll be paying a bigger tax if you won’t deduct your expenses from your income- a result for forgetting to record expenses.
Have a purse or box where you can keep all your business purchase receipts. Then organise them in your tax folder or scan them to be saved in your cloud software. One way of minimising the hassle is to use your bank or credit card to pay for business expenses, so the transaction can automatically be linked with your small business accounting software in the cloud.
Not Chasing After Account Receivables
Receivables are what we’re really after. But how can you monitor your accounts receivables so you won’t fall back behind?
If you fail to apply the amount paid by the customer against the invoice, you’ll have tons of problems to face during tax time. You’ll be confused at the piles of receivable reports at your table and would have to list and organise them; therefore, you’ll waste a lot of your time figuring things out.
A good hack to minimise manual entry of invoices would be to use a cloud accounting software combined with an online payment system to automate the process. You’ll have less worries later when it’s time to account and audit everything.
There are still less noticeable mistakes that most entrepreneurs do to their small business accounting. But these three mentioned misdoings are inexcusable. They’re deemed to be the basic mistakes that you’re accounting department must make an effort to correct regularly.