With small businesses, resources are often a scarcity. Minimizing the time and effort you spend operationally on processes like accounting and financial management can help you save time and money in the long run.
In an effort to save time and conserve resources, small business owners often overlook little things that can make a huge impact on their company. One such area is managing the business’ finances; done right, it can give you the financial flexibility you need, done wrong and it can be a drain on the business operationally. Here are five common accounting mistakes SMBs should avoid.
1. Doing everything yourself
For various reasons like in an attempt to save money, or simply out of sheer passion, small business owners often try to do everything themselves, which is admirable, but can also cause problems. Not only do you have less time to devote to critical administrative activities, you might also be prone to making mistakes if you are pulled in too many directions once the business starts to grow. Advice or help from an expert or accounting specialist could help you take a great responsibility off your busy shoulders and help you focus better in other areas where you’re needed.
2. Going for the cheapest solution
The lure of immediate savings by opting for low-cost solutions is another common trap that small businesses often fall into, particularly those that are cash-strapped. Investing in the right hire or high quality technological solutions will save you valuable time and money in the long run as the costs associated with breakdowns or replacements will be less.
3. Not maintaining records and receipts
Record all transactions, no matter how small or insignificant. This includes cash transactions at your storefront and the receipts from your client dinner. Keeping a record will help you catch any accounting mistakes, capitalize on tax deduction opportunities and be beneficial if an audit takes place.
4. Mixing business and personal finances
Using the same accounts for business and personal transactions should be avoided as the hassle of differentiating them can quickly get out of hand and before you know it, you’ll have lost track of whether the money going in and out of your account is for personal use or for your business. You might also invariably end up misclassifying your transactions and creating gaps in your business accounts, which will not only put your business at risk, but this can lead to problems when filing your taxes later on.
5. Not keeping a backup
This seems obvious, yet some businesses still fail to back up their financial records. Needless to say, regularly backing up your records not only insulates your business from issues like computer crashes, loss of equipment, accidents and natural disasters, but you will also be able to use and analyze your data for years to come. Using internet-based accounting software like QuickBooks will automatically backup and store all of your data securely online and gives you access to your accounts in real time, anytime and anywhere.
Accounting and bookkeeping is a critical part of your business. Invest your time and money in finding the right people and accounting solutions to build a strong and lasting base for your business.