If you are a small business owner, you will always have plenty to do while managing your financial assets and perhaps very little time to spare.
You must however, take some time out to set certain things right. These are six quite common mistakes that small business owners make when it comes to accounting. Here are the problem statements and procedures for you to make them right:
Mistake 1: Misrepresentation of your financial affairs
While giving a face to your financial affairs, you will be inclined to adjust your income statement. For this, it is recommended to categorize your business expenses statement with that of personal expenses. In this, your bottom line will look good and the bank will be in a position to approve your loan application if required.
Mistake 2: Failure in hiring the right accountant for your requirements
If you have a small business and money is a constraint, then you are in a quite difficult situation to hire an experienced and reliable accountant. A good accountant will be able to add value to your business by helping you minimize your expenses and taxes. He will also be in a position to maximize your profits. So even if you have to spend some extra dollars, a professional accountant is sure to make that worth.
Mistake 3: Improper trail of accounting procedures and policies
In order to maintain a proper accounting book, it is necessary for you to follow the policies and procedures defined for accounting. They might seem difficult to adopt but once these procedures are implemented, your accountant will be finding life a lot easier with better efficiency and accuracy.
Mistake 4: Money kept aside for tax payments should be forgotten
If at any point of time, you are financially stuck in your business operations and experience a halt, you are likely to be tempted to delve into the money which you have placed aside in a separate account to meet your tax bills. This should not be done at all as it will lead to year-end financial restlessness which can have an adverse impact on your running business activities.
Mistake 5: Improper software or accounting tools
It is a fact that accounting software packages cost a little extra but this cost should not keep you from taking the entire headache out of your bookkeeping activities. With proper accounting software in place, you will be in a position to avoid the many silly mistakes. Better reports can be created and any-instant state of financial assets and liabilities can be achieved for taking time-bound business decisions. There is a wide variety of business-specific software that small business owners find affordable and easy-to-use, with the best among them being hosted QuickBooks.
Mistake 6: Regular backups of your accounting data
There are many small business owners who fail to create backups of their data and that too when all the data is electronic. If you fail to capitalize on this, your data may get corrupted or may even be lost when an inconsistent state is recovered after a server failure or breakdown. In this situation, if you do not have your entire accounting data backed up, then you are sure to find yourself in troubled waters. Business owners using cloud accounting services usually do not face this trouble since their data is regularly mapped to various other backup servers that are maintained at geographically dispersed locations by the service providers.