Five Common Mistakes in Small Business Accounting to Watch For

Posted on November 3, 2015

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These Small Business Accounting Missteps Can Make Tax Time Difficult

small business accountingUnless your company specializes in small business accounting, chances are you’re more focused on doing all the core parts of your business. Invoicing, receipts and payroll are most likely pushed to the bottom of your to-do list. Even if you are the rare entrepreneur that enjoys the fine details of small business accounting, it is important to be aware of these common mistakes that often come to light at tax time.

Here are common mistakes you may encounter:

Always leaving receivables for later. When you run a small business, watching the cash flow in can be extremely satisfying. However, any time you create an invoice, you also create a receivable. If you make a habit of taking in payment without recording the receipt of that payment on your customer’s receivables record, you leave room for mistakes. Putting off receivables work could lead to hours of reconciliation or paying too much in taxes.

Not filing business expense receipts. Do you have a monthly routine of staring at your bank statement, trying to figure out where you spent the money? If you are forced to spend a lot of time trying to match spending with business expenses, it would be beneficial to put in place a better system for filing receipts.

Instead of tucking your receipts in your pocket or the cup holder of your car, come up with a simple spot for receipts. An envelope for each month is one way to keep track of your receipts that is streamlined and helps to keep track of all your receipts. You’ll appreciate how much easier it is to make sense of your bank statement. The alternative? You’ll likely underreport your expenses and end up paying too much in taxes.

And then there’s cash. While software or check stubs can easily capture information about many of your purchases, cash spending is often overlooked. This means that you can end up paying too much in taxes because all of your expenses are not being captured. Consider keeping a simple log on your smartphone where you can jot down what you purchased, and the amount. Then put the receipt in your envelope.

Not hiring the help you need. You may think that your budget won’t support the outsourcing of your accounting department. However, if you are consistently underpaying in taxes or you spend hours reconciling figures, you may end up with a lot of hidden costs, like penalties you’ll pay in the future for underreporting your income or a wasted opportunity while you were busy trying to create a balance sheet.

Outsourced accounting may seem like a luxury if you are just starting out. However, allowing an expert to handle your small business accounting can take your daily bookkeeping headaches away, but they can also provide guidance and advice with your comprehensive financial situation in mind.

Hiring the wrong accountant. You hired an accountant, but you’ve had too many conversations where you can’t understand the words they use. Or maybe you don’t get the idea that they are invested in your goals and vision for the business.

When you hire someone to handle your small business accounting needs, you should have a strong sense of partnership and trust. Your accountant should be interested in what you want to achieve with your business.

At AccuBiz, Bert Doerhoff, CPA is a trusted advisor that provides small business accounting services to companies like yours. Call us to set up an appointment and we can talk about your specific needs. Let’s make a plan to avoid these common accounting mistakes for a successful future.

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