The Top Five Accounting Mistakes to Avoid
Are you making any of these accounting mistakes? We’ve outlined the top 5 accounting issues that small business owners trip over so that you don’t have to make the same mistakes.
Starting a business can be challenging, especially when managing your numbers and staying on top of your financial management.
Unless you've got some experience in finance, the bookkeeping and accounting requirements can be daunting. And even with today's helpful cloud accounting platforms and fintech apps, there's always the possibility of making a simple accounting mistake.
So, what are some of the most common accounting mistakes of business owners? And what can you do to avoid these issues and keep your finances healthy and safe?
The top five accounting mistakes to avoid
'Doing the books' is unlikely to be your favourite part of running a small business. But the better your accounting know-how and skills, the more oversight you have over your company's financial path (and future success). It is that simple.
But there are plenty of traps that a newbie owner can fall into – and even a few hurdles that the more experienced business owner may trip over from time to time.
Let's take a look at the five most common accounting mistakes:
1. Mixing your personal and business finances—When you don't separate your personal and business transactions, the lines blur, and it becomes difficult to track your income and expenses accurately. This can also lead to personal spending being counted as business deductions, later causing tax issues.
Solution: Open separate business and personal bank accounts and keep them entirely separate and distinct.
2. Skipping the record-keeping process—If you fail to keep receipts, log invoices, and maintain proper records, this can be a significant problem later. Detailed records are crucial for tax filing, budgeting, and identifying spending trends.
Solution: keep digital copies of all receipts and keep your bookkeeping up-to-date and well-managed.
3. Miscategorising your expenses – Throwing them under 'miscellaneous' makes it far more challenging to analyse your spending and cash flow. With every expenditure item logged under a specific code from your Chart of Accounts, you can quickly run reports, review your spending, and look at ways to improve budgets and cash flow.
Solution: Categorise your expenses correctly (rent, marketing, supplies, etc.) to understand where your money goes.
4. Winging it when filing your taxes— Taxation is complicated, and making costly mistakes is easy if you're not prepared and organised. Don't wait until tax season to sort everything out and ensure you know all your business tax liabilities.
Solution: Set aside funds for taxes throughout the year, and consider consulting an accountant or tax adviser to ensure you're filing correctly and taking advantage of all potential government deductions and tax incentives.
5. Failing to get proper accounting advice – if managing your finances becomes overwhelming, don't be a hero. Cloud accounting software can automate critical tasks, and a bookkeeper can handle day-to-day record-keeping.
Solution: consider outsourcing and partnering with an experienced accounting firm to get real peace of mind and improved financial management.
Talk to us about outsourcing your key accounting tasks.
It would have helped if you had started your business by spending hours on bookkeeping and accounts. Why not outsource your essential accounting tasks to us and return those hours to your company?
As your accountant, we can:
- Show you how to separate your personal and business finances clearly
- Set up your bookkeeping to be as streamlined, automated and efficient as possible
- Show you the best software tools and processes for managing your expenses
- Become your tax agent and take care of all the complex tax filing tasks
- Provide reporting, management information and advice to guide your decision-making
Get in touch to talk about outsourcing your finance tasks.
