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If you own a business, you need to be involved in each portion of the operations. Thankfully, this doesn’t mean you have to know every detail about each task. Many business owners are well-versed when it comes to sales or delivering their product or service, but sometimes fail to master the activities of accounting and finances.
Even though accounting is arguably the most important aspect of business operations, it is often the area that succumbs to the most mistakes. These mistakes can be detrimental to business growth or, in a worst-case scenario, can result in an IRS audit or cause you to lose clients.
Here are the top 5 accounting mistakes owners should understand to avoid negative consequences.
Leaving out Details
There are so many things that have to be done in a day, and it seems the list continues to grow over time. When something has to give, it is often the daily recording of financial information that is cut. We tell ourselves we’ll catch it up over the weekend or find some time after hours, but the time doesn’t come. This results in not being able to refer to your current financial report. When you can’t do that, you can’t make the right decisions.
If you rushing through bookkeeping, and not giving it the required effort it should have, you are going to leave out important details about cash flow that are required for good analysis. You need dedicated time and attention to bookkeeping, either through you or someone you hire. The bookkeeping is the foundation on which your business is built and it can’t be neglected.
Not Working on a Budget
Most small businesses don’t have unlimited funds to work with, so a budget is vitally necessary. A budget provides you with the strategy to move your business forward. It also gives you controls and guidelines so you will not overspend. The budget is also important for anyone else in your company who is spending, either purchasing materials for client projects or buying office supplies. Perhaps not everyone in the office should get that Howard Miller office chair for $600. The budget helps you to easily answer requests with “Let’s look at what’s in the budget.”
Most of the accounting mistakes deal with owners who are not doing enough in the accounting area. But the opposite end of the spectrum lie the owners who are completely overwhelmed by all things financial. They are constantly pouring over their reconciliations and spending far too much time in their daily books. At a certain point, it befits an owner to see that they are not the person for the job. If accounting activities are taking you away from what you really love to do or what you are good at, then it is time to seek the help of a professional. Find a company that is reputable and has been in business for many years like Atkinsons Chartered Accountants. This way you will know they have seen everything and will be proactive in helping your business avoid accounting mistakes.
Thinking Technology Is Always the Solution
Just buying the latest and greatest software doesn’t solve the accounting problem. It is still up to you to input information and make sure everything is running properly. Don’t overspend thinking new software will resolve financial issues.