Starting a business can be quite a challenge, especially when it comes to managing your numbers and keeping your finances in check. If finance isn’t your strong suit, dealing with bookkeeping and accounting needs can feel overwhelming. Even with today’s handy cloud accounting tools and fintech apps, a simple accounting error can still happen.
So, what are the most common accounting slip-ups entrepreneurs make? And how can you steer clear of these mistakes to ensure your finances are in good shape? Let’s dive into the top five accounting blunders to avoid.
Managing the books may not be the most exciting part of running a small business, but honing your accounting skills gives you better control over your company’s financial journey and future success. It’s as straightforward as that.
However, there are several pitfalls that new business owners can stumble into, and even seasoned entrepreneurs may face a few challenges now and then.
Let’s take a look at the five most common accounting mistakes:
1. Mixing your personal and business finances can be a bit of a headache – when you jumble everything up, tracking your income and expenses becomes a real challenge. Plus, you might accidentally claim personal expenses as business costs, which could cause tax problems down the line.
Quick fix: Sort it out by setting up separate business and personal bank accounts and keep them totally distinct.
2. Skipping the record-keeping process – If you forget to hold onto receipts, make sure to log your invoices and keep good records. It can become a big issue later on. Detailed records are key for tax filing, budgeting, and spotting spending patterns.
Quick fix: Hang on to digital copies of all receipts and make sure to stay on top of your bookkeeping to keep things running smoothly.
3. Miscategorising your expenses by dumping them all into ‘miscellaneous’ can really mess up your spending analysis and cashflow tracking. When you log each expense under a specific code from your Chart of Accounts, you can easily whip up reports, check your spending, and figure out how to boost budgets and cashflow.
Quick Fix: Make sure to categorise your expenses correctly (rent, marketing, supplies, etc.) to get a clear picture of where your money is going.
4. Winging it when filing your taxes – Taxation is complicated and it’s easy to make costly mistakes if you’re not prepared and organised. Don’t wait until tax season to sort everything out and make sure you’re aware of all your business tax liabilities.
Quick Fix: Save up some cash for taxes each month, and maybe chat with an accountant or tax advisor to make sure you’re on track with filing and making the most of any government perks and tax breaks.
5. Failing to get proper accounting advice – if managing your finances becomes overwhelming, don’t be a hero. Cloud accounting software can automate some of the key tasks, and a bookkeeper can handle day-to-day record-keeping.
Quick Fix: Consider outsourcing and teaming up with a seasoned accounting firm for genuine peace of mind and better financial management.
Talk to us about outsourcing your key accounting tasks – You didn’t start your business to spend hours working on your bookkeeping and accounts. Why not let us help with your key accounting tasks and put those hours back into your business.
As your accounting partner, we can:
- Show you how to clearly separate your personal and business finances
- 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
