Running a small business can prove to be quite arduous as you try to make a name for your business and increase your bottom line. However, what most small business owners do not realize is that simple accounting mistakes can go a long way toward impeding the growth of that business. To avoid the risk of losing your business due to bad accounting, it is always best to enlist the services of tax accountants. Not only do these professionals work toward ensuring that your business meets its legal responsibilities, but they can also help streamline our business expenses, which will contribute to an increase in profits. However, these tax accountants cannot do all the work for you. Here are some accounting mistakes you should avoid for your small business to thrive.
Keeping improper records of receivables.
In most business, once you issue a client an invoice, you are supposed to record a receivable. This means that the customer will be in debt to you until they pay for their goods. It enables you to make a quick reference on which customers have outstanding balances. Once they pay for this, you are required to apply the payments to the receivables record. However, some business owners will receive money and forget to update their record of receivables. This eventually leads to a pile of deposits that have not been accounted for and do not add up when compared to the revenue of your business.
The consequences of this include high tax payments, a higher chance of bad debts, and having to spend more money on tax accountants to put your receivables list in order. The best and simplest way of avoiding all this extra manpower and expenditure is ensuring that you update your receivables on a regular basis. You could do this manually or invest in software that will automate the entire process, thus ensuring that your records are not only up to date but are accurate too.
Throwing away receipts.
Granted, nobody likes having to deal with bundles of receipts. Not only can they become unsightly, but they also take up space. However you have to consider your business as a separate entity and not treat expense receipts as you would your own personal receipts. It is important to keep track of expense receipts so that all the business expenses are accounted for. Not doing this can lead to cash flow problems and a myriad of tax related issues.
The best way to do this would be by having an exclusive expense account for your business. This way all transactions will be logged onto one credit card, making it easier to keep track of your expenses. Additionally, put aside a specific folder for business receipts. You do not even have to sort them out on your own. Having them in one place makes it easier for tax accountants to put your business affairs in order once tax season rolls around.Share