5 Common Small Businesses Accounting Mistakes
Small business owners have to be proficient in a number of ways. Obviously, they must know the field they deal with – a baker can’t get by without being awfully talented at navigating an oven – but they also must have some competency in leadership, organization and marketing.
Unfortunately, those skill sets often stop short of accounting.
Managing the books of any business – small, medium or large – is a difficult task, which is why many businesses, when they grow large enough to afford it, bring on an accountant as part of their staff. But many business owners, especially early on, try to get by on their own … and they can trip over a few accounting land mines along the way.
Here’s a look at some common small business accounting mistakes and how to avoid them.
Common Small Business Accounting Mistakes
1. Being Lazy: One of the worst possible things you can do is simply fail to record certain financials, such as revenues or business expenses. You don’t need to worry about this to the extreme – if you happen to lose a $15 receipt for coffee with a potential client, you’ll be OK. But if you habitually fail to mark down larger expenses over the course of the year, that could leave a huge cap in your financial statement, leaving the IRS to wonder, “Where’d it all go?”
2. Your Money vs. Business Money: This combines two of the simplest rules: Be honest, and be safe. As a good for-instance, don’t use the same credit card for personal expenses and business expenses. The IRS has caught business owners burning the system by trying to deduct meal and travel expenses that weren’t actually part of growing the business, so they might scrutinize these expenses – and even innocent mistakes could get you into hot water.
3. The “Manual” Choice: Even if you are doing your best to be diligent in recording all of your financials, there’s still the potential for human error. That’s why even small businesses should consider implementing automated accounting systems that take the guesswork out of various transactions and make sure that everything gets marked down in an accurate and timely manner.
4. Losing the Paper Trail: Again, even if you’re doing everything right, even the best accounting software in the world can’t guarantee you an audit-free existence. In the event that the IRS should ever come knocking, make sure you haven’t made the fatal mistake of torching old receipts to save room around the office. Keep all receipts, expense form copies and any other transactional material either in hard-copy or digitized form; that way, it’ll be much easier to get to the bottom of any mistake.
5. Going It Alone: Some small business owners are true do-it-yourselfers who try to take on every task as they build their companies from the ground up – including working on the books. Other small business owners simply don’t believe they have the funds to bring on accounting help, so they reluctantly take on the task themselves, or try to enlist unqualified help. You don’t need to fall into either trap. McManamon & Co. offers business accounting services of all kinds, from tax preparation to helping you utilize bookkeeping software – and we specialize in small to mid-size businesses like yours.
To learn more, contact us at 440.892.8900, or send us a message.
Tags: accounting, McManamon & Co., small business, small business accounting mistakes | Posted in accounting, McManamon & Co., small business