Avoid These 5 Costly Accounting Mistakes
What do business owners love and hate most about owning their own business?
Unsurprisingly, flexibility and feeling in control ranked first in the “love” category. Meanwhile, a larger percentage of business owners say bookkeeping was hands-down their most hated task.
Most business owners understand that effective financial management is key to their success. But lack of knowledge, frustration, and even avoidance can add up to accounting mistakes that derail future growth.
Protect your business and reduce your stress by avoiding these five costly accounting errors.
1. Mixing personal and business finances
From day one, business owners should have a separate bank account in which to deposit their income and pay their business expenses.
It’s also crucial to designate a business-only credit card. Come tax time, separate statements will make submitting claimable expenses quick and easy, while reducing the risk of a painful audit.
2. Letting accounts receivable slide
It’s frightening how easy it is to lose track of which customers have paid you and which clients are late. Implement a strict policy and schedule for tracking accounts receivable and pursuing unpaid invoices. it has never been easier to get paid with the options available in accounting software platforms today. They even have a tracking capability that allows you to see if your invoice has been receives, viewed and timelines.
- ask customers to pay at the point of purchase or no more than 30 days later;
- contact clients to confirm they have received your invoice and to agree on a payment date; This can be managed best through your online accounting software.
- follow up immediately when payment dates are missed; and
- keep accurate, up-to-date records of each client’s payment history.
Using a cloud-base accounting program makes debtor management a breeze by automating your monthly invoicing – and contacting late payers with a reminder email.
3. Invest in cloud accounting software
Do you know how many times I hear clients ask “Do I need to upgrade my old accounting program?” Investing in a cloud-based accounting solution can make running your business a breeze simply by all the automation it provides. Having live information available at your finger tips allows you to have a stronghold off your business performance.
4. Not using technology to track your expenses
Tired of chasing down missing receipts and struggling to justify claims come tax time? There’s an app for that! Choose from numerous options, such as Receipt Bank, Expense Manager or Expensify. MYOB, Xero and QBO software have the ability to take photos of receipts that then automatically upload into your online file for easier processing.
Many of these apps generate expense reports that are easy to share, or sync automatically with accounting software.
Neglecting to strategize for long-term growth
Effective accounting means managing day-to-day finances whilst making provisions for future growth. Software and cloud-based solutions offer easy ways to track your financials, but they also generate reports and provide analytic tools SMB owners can use for future forecasting.
Familiarise yourself with the reports your software can generate to track long-term trends, identify and mitigate risk, and discover new ways to increase profitability. Talk to your bookkeeper, accountant or advisor about which reports and metrics are most important for your particular business and how to utilise them.
5. Don’t go it alone
Small business owners are rarely trained accountants. Don’t try to manage your company’s finances all by yourself.
Collaborate with a trusted professionals, invest in quality IT solutions, and spend some time familiarising yourself with relevant tools and trends.
You’ll feel empowered, which is step one to forging a more love-filled relationship with small business accounting!
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