Running a company isn’t an easy task, let alone keeping the finances going smoothly. That’s why SMEs either go for in-house accounting, or hire accounting services. But in case you wanna keep it in-house, there are accounting mistakes that you need to avoid. So today, we’re gonna discuss those mistakes and how they can harm your business. Now, let’s get into it all and how to identify these mistakes, shall we?
Common Accounting Mistakes to Avoid
Mixing Personal and Business Finances
When operating a small business, it’s easy to mix the personal finances with the business ones. For example, owners could take out money from their personal accounts to pay business expenses. And this makes the bookkeeping process and tax filings more complicated. The solution here is simple, opening two separate accounts will get the job done!
Lack of Regular Account Reconciliation
Failing to reconcile accounts regularly can lead to mistakes in the long run. You see, regular reconciliations can catch undetected errors like double charges or missed payments. And of course, the solution is to regularly reconcile those accounts.
Misclassifying Transactions
Inaccurately classifying transactions, aka income and expenses, can lead to bookkeeping mistakes and errors in financial reports. This can also affect tax filings and cause issues. So, the solution here is to either go for software that can handle it, or hire outside help.
Delaying Record Keeping & Data Entry
Delays and poor record keeping leads to inaccurate records, which is a recipe for errors and accounting mistakes. And to avoid this type of procrastination, you should update your records as frequently as once a week. To make this easier too, using accounting tools will definitely help you out.
Poor Cash flow Management
Not keeping an eye out for receivables and payables can lead to a bottleneck, especially when the company needs liquidity. This is why constant monitoring of cash flow, and installing payment reminders can save you all the trouble.
How Can These Mistakes Harm Your Business?
Basically, these accounting mistakes can pile up and lead to losses, as well as cash flow issues and tax penalties. And if this drags on long enough, it can lead to the failure of the business as a whole. So, there are two courses of action that you can follow here. The first is to hire accountants and use accounting software to organize everything. And the second option is to hire an accounting firm that handles the finances of SMEs.
If the second option sounds like the one you’d like to opt for, you’re in just the right place! At Noraal, we offer all the accounting services that small businesses need. In addition to that, we have a range of services and solutions that are tailored to your company’s specific needs. So, what are you waiting for? Contact us today for a consultation, and we’ll handle everything from there! That way you can focus on what actually matters, and that’s the growth of your company.