When it comes to growing your business, few decisions matter as much as tracking your company’s finances. In the beginning, many small business owners try to manage their books independently rather than hiring a financial professional.
For many business owners, going at it alone leads to easily avoidable mistakes. Here’s a look at some of the biggest accounting mistakes that can derail small businesses, along with some tips for avoiding them.
The biggest accounting errors small businesses make
In accounting, sometimes the smallest errors can have a significant impact on your business’ financial health. Here are some examples of common accounting errors.
- Overstating cash flow: Adequate cash flow is a crucial aspect of running a successful business. Unfortunately, many businesses overestimate how much cash they have on hand, which can lead to problems when you need to pay your employees and vendors, as well as fund important business purchases.
- Incorrectly tracking income: If you don’t accurately track your business’s revenue, you could end up over-reporting or under-reporting your income. This crucial detail can have significant repercussions when it comes time to calculate what taxes you owe.
- Incorrectly tracking expenses: Another common mistake businesses make is failing to accurately track their expenses. Keeping track of business expenses helps you know what your taxable income is, what you can claim as deductions, and make sure you don’t have to pay more than you need to in taxes.
- Forgetting to pay invoices: When vendors send invoices for services rendered, they likely have a due date within 30 to 60 days. If you don’t stay on top of your accounting, it’s easy to overlook these due dates and pay your invoices late. This can lead to late fees and damage your relationship with your vendors.
- Missing the signs of fraud: Some business owners want to handle all the accounting themselves, while others make the mistake of outsourcing everything. You should never put yourself in a position where you don’t know what’s going on with your business finances. Failing to track your finances could cause you to miss the signs of fraud.
At Seward, Accounting and Tax we have a team of experienced financial professionals who have the time and knowledge to give your business’ financials the attention they need. By ensuring your accounts are routinely monitored, you will ensure you have the cash flow you need when you need it, and that you will be prepared when tax season comes around. Fill out our free estimate form to get started!