You’re pitching new business, servicing existing accounts, managing operations, hiring employees, taking stock of inventory, paying bills, and sending out invoices.
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Small business owners have to wear many hats—and, often, many of those hats at the same time. You’re pitching new business, servicing existing accounts, managing operations, hiring employees, taking stock of inventory, paying bills, and sending out invoices. Because you’re tapped for time, and your business occupies most of your waking hours, you probably have to prioritize regularly—and some administrative and accounting duties inevitably slip. Don’t make the following accounting mistakes when working on bookkeeping.
Staying on top of accounting is crucial. After all, you have to make sure you get paid for your work, because finances keep your business going. And, while everyone is different, many small business owners make the same mistakes, across industries and markets. Have you, perhaps, fallen into any of these five common accounting mistakes?
5 Accounting Mistakes That Cost You Money
Five Small Business Accounting Mistakes
#1: Not staying on top of your receivables.
Most people are honest—and that includes most customers. You’re probably finding most of your clientele pays their invoices in full and on a timely basis. What about those outstanding bills, though? It’s important that you stay on top of your receivables in your business. Doing so will help you more closely match cash flow to expenses, eliminating that gap between rendering services or delivering product and getting paid. And, you can more easily and quickly determine when a customer is not going to pay you, so you can send that receivable to collections or write it off.
#2: Not keeping receipts for expenses.
Tracking your expenses—for your business and for client projects—can be distracting and time-consuming. Yet, you’re going to need to reconcile this information for accounting and tax purposes. Save yourself time in the long run by creating a system to painlessly manage this aspect of doing business. Consider using only your business credit or debit card for all business expenses, and reviewing your expense receipts on a regular weekly or monthly basis, while they’re still fresh in your mind, so that you categorize them for the correct project or account. That way you’ll also avoid the trap of tackling a mountain of old receipts when you can no longer recall what they’re for.
#3: Mixing business and personal finances.
You should not mix your business income and expenses with your personal income and expenses. Open a separate account for your business, and set up a separate debit or credit card for your business. Doing so also lets you easily track income and expenses so that you have a clear picture of your business’s finances on a regular basis—and so that you can assess, with clarity, if your business is in the black.
#4: Trying to do your taxes yourself.
While it may be tempting to consider doing your taxes yourself—to save time and money in the short run—don’t succumb to that temptation. A professional tax accountant has the most current and in-depth information on tax laws that can benefit your filing, and on what local, state, and federal tax stipulations may apply to your business. And, if you do file your own taxes and make a mistake that could trigger an audit, you’ll wish that you’d had a professional prepare your tax returns, as audit costs can run into the thousands.
#5: Not communicating clearly and effectively with your accountant.
Your accountant can help guide you in important decisions for your business—when to hire employees, when to expand operations, how to handle growth or even a poorer-than-expected year. It’s important that you have trust in and a solid working relationship with your accountant, and that you’re working in step together. If you don’t understand a concept or a recommendation from your accountant, ask for further or clearer explanation. Make sure you’ve chosen a partner who will actually be a partner in your business growth.
You don’t make any of those accounting mistakes, do you? If you’ve fallen into any of these traps, you have plenty of company. And, nothing is so dire it can’t be righted. At McClure, Inserra & Co, we have over 30 years’ experience in helping small and mid-sized businesses handle their accounting needs so their businesses can grow and thrive. Contact us to talk about how we can help you, too.