December 21, 2019
How to Avoid Common Business Accounting Errors
Bookkeeping can be especially tricky, especially for anyone who doesn’t consider math one of their strong suits. Handling your business’s bookkeeping yourself can result in a variety of common accounting errors. Luckily, there are simple ways to avoid these errors. There are also ways to recover if you’ve already experienced any of them.
Breaking Down Common Accounting Errors for Small Businesses
There are some types of errors in accounting practices that small business owners are likely to run into. They include mixing personal and business expenses, math errors, confusing accounting principles, and failing to complete financial tasks. Each of these errors can be avoided. Sometimes, you simply need a better understanding of basic bookkeeping concepts. For other issues, putting in extra time can save you from being stressed in the future. Even with careful planning and good intentions, there are numerous types of accounting errors can happen. It isn’t the end of the world if they do. However, you may need outside help to get your business back on track.Not Properly Separating Business and Personal Expenses
Often, new business owners use their personal credit card and bank account to pay for their business expenses. While this method seems acceptable, it can lead to issues down the road. For instance, some customers may consider it unprofessional if your name is on invoices instead of your business name. In addition, mixing expenses can cause difficulties at tax time and can cause you to miss out on benefits, like writing off business expenses. A simple way to avoid this error is to separate your expenses clearly. Opening a business credit card and bank account will make this process easier. If all of your business expenditures are on your business credit card, you won’t have to guess what purchases were for at tax time. Remember, you’ll still need to hold onto all of your receipts to show what the expenses were for. Dedicated business accounts will also show customers, stockholders, and the IRS that your company is legitimate and that you’re serious about building a successful business.Common Mathematical Errors
Advances in technology, such as bookkeeping software, can detect and help you avoid a variety of math mistakes. However, even the best software may not be able to catch a simple typo. In addition to transposing digits or hitting the wrong number on your keypad, other errors include entering information in the wrong column, such as recording an expense as income. Also, omitting certain data is also a concern. Don’t forget to keep track of sales tax, as some states require you to file a return for sales tax even if you didn’t collect any during that period. One way to avoid these errors is to automate as many of your processes as possible. Try exporting transactions from your online banking so you can copy and paste data into a spreadsheet or software, rather than entering it manually. Some software allows you to connect your bank and credit card accounts, so accounting records are pulled automatically. For any numbers you enter manually, double- or triple-check your entries. Going over a spreadsheet with a fine-tooth comb isn’t exciting, but it will be worth it if you can find and correct a mistake early on. Also, use a calculator for any math you do yourself. You might think you don’t need it, but it doesn’t hurt to be careful.