There is nothing better than building a successful business. The kind that enables any entrepreneur to deliver superior services than all of his competitors. While passion may energize you, there is another side of the business that can equally drain you… accounting! There is hardly any business owner that wakes in the morning, excited by the idea of balancing transactions. Needless to say, accounting is key to business success. Every business owner should monitor their accounting closely in order to avoid making these common mistakes:
1. Hiring the Wrong PeopleMany small business owners often hire the wrong people for the job. Even though hiring a highly experienced accountant may not be affordable for new business owners, it is still important to hire an accountant who can competently handle the job. While cheaper hires may be tempting, always remember that garbage in, garbage out. Do not make this common mistake and put your business credit at risk.
2. Never Reconciling Books and Bank StatementsIn order to ensure that there are no mistakes between the company’s records and bank statements, reconciling recorded transactions is very important. This ensures accurate bookkeeping as failing to reconcile the two will lead to ineffective accounting.
3. Venturing Into New Projects without a Clear BudgetWhile free online estimate templates may give a good estimation, it is always advisable to venture into a new project after a good feasibility study and a reliable budget. If a clear budget is not prepared, then the business will suffer inevitable losses because a lot of money is needed to salvage a project that is not moving towards its objectives.
4. Lack of OrganizationIs it easy to locate all of your receipts, debit card for expenses or even notes on petty cash expenses? If this is difficult, then the business lacks organization. For many business owners, it is easy to use money without being accountable for it. This is a common accounting mistake that can lead to massive losses. It is always better to have receipts for any expenses in order to be credible to the accounting department.
5. Failing to DelegateBusiness owners who want to balance the books, consult free online estimate templates and are unwilling to delegate bookkeeping to experienced accountants are bound to fail. Good accountants have the critical ability to handle everything about business accounting competently. If you are not qualified in accounting, then you will make a lot of mistakes. As such, expert advice is needed.
Outsourcing accounting work can also be a form of delegation, especially if you lack the necessary resources to hire full-time employees. This could also be a way to save money for the company.
6. Forgetting to Record Small TransactionsMany business owners think that petty cash transactions are unimportant. However, they are certainly significant to the accounting process. Ensure that all cash purchases for your business are recorded. Staying on top of small transactions ensures that the transactions increase and the books are easily managed. It is also best to stick to an electronic form of payments instead of cash wherever possible.
7. Poor Communication with the AccountantThe accountant should be fully informed about all of the business on-goings. Information about transactions is particularly important as they determine the growth of the business. Do not fail to report recurring costs or any new purchases. Keeping a paper or digitized record of transactions makes it easy to avoid common accounting mistakes.
8. Not Understanding Vital Terms and MeasuresIn order for accounting to be successful, business owners need to understand what macro and micro accounting entails. This also ensures that losses are not experienced in the business. It is important to know the key metrics that you should be familiar with, cash flow reports, balance sheets and income statements. This can only be done by developing a regular habit of looking at financial reports. It will also allow a business owner to catch and mitigate financial issues before they become detrimental to the business.
If you have committed any of these common mistakes, it is not too late to make a change. Making mistakes is part of every entrepreneur’s experience. However, as the business becomes more established, you will realize that accounting plays a big role. Always automate as much as you can and simplify all of your accounting procedures. Finally, it’s vital to ensure that your business bolsters financial strength at all times if you want to have any chance of success well into the future.