When running a small business, mistakes are unavoidable. A common area for blunders is bookkeeping and accounting. Accounting mistakes range from small errors, such as not remembering to store low-value receipts, to major issues that affect your business’s cash flow and put your company in danger of insolvency.
Let’s look at four of the most common small business accounting mistakes and how to avoid them.
1. Not asking for help
There are many business owners who wish to manage their own accounts. This is not only to save money but also because they think they are best qualified to do the job as they run the business. These things are not necessarily true; in fact, bookkeepers are vital to business owners, as they can focus their time and productivity elsewhere to make the organisation a success.
Accountants in Cheltenham, such as Randall & Payne Cheltenham Accountants, understand the best methods to save your business money and are likely to save you cash in the long-term, even though they charge a fee.
Mistakes are costly, so it is vital you hire a professional bookkeeper or accountant.
2. Failing to reconcile bank statements and books
Reconciling bank statements and books is vital in ensuring no discrepancies occur between real and recorded transactions.
3. Paying small expenses from your own pocket
As the owner of a small business, you have probably lost track of how many times you have paid expenses from your own pocket. Small bills, odd business items or drinks after work with the team are all small expenses that are easily paid from your own pocket; however, this creates two major issues. Firstly, not recording all payments quickly can result in inaccurate financial records; secondly, using your personal money for business expenses means you are making the company finances seem healthier than the real situation.
Ensure these transactions are documented so that they can be accounted for fully in the books.
4. Using business accounts for personal expenses
On the other hand, it can be tempting to use your business account for your personal expenses. If you own the company, using a director’s account for paying occasional expenses does not result in significant issues; however, if this is done frequently, it can cause financial problems for the business. Overdependence could put your business in a difficult financial position.