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Common small business accounting mistakes and how to avoid them

For any firm, keeping accurate accounts is important. Up-to-date cash flow, and profit and loss reports ensure that you always make smart choices for your business. Realising early on that a client has not paid on time is also important, and is something you are only going to be able to do if you take care of your accountancy tasks properly.

It doesn’t matter what type of business you run, getting your accounts right will help you to thrive. However, despite this well-known fact, a lot of firms still make some terrible errors when it comes to accountancy. To help you to avoid these common mistakes, we have put together the following list of frequent mistakes:

Unclear procedures

Not having proper accountancy processes in place is the most common error. Without clear procedures, your staff simply will not be able to feed the information you need into your accountancy system. You need to make it easy to understand what details need to be added to the system, when and how.

Letting accountancy tasks pile up

Even firms that already have clear procedures in place often do not make accountancy tasks a priority. They regularly allow piles of un-scanned invoices and receipts to pile up. This is a huge mistake.

It’s very easy for these pieces of paper to get lost. If you lose a receipt, you cannot safely add that cost to your list of expenses. This means you end up paying more tax than you need to.

What’s more, if details are not fed into the system as you go, any reports you are looking at are going to be woefully inaccurate. The upshot is that you will always be making important decisions based on incomplete and inaccurate data.

Not training people properly

Most firms take the time to employ well-trained staff in their accounts departments and hire an experienced accountant. What they tend not to do is to train everyone else.

The majority of employees are not aware of how important it is to keep track of expenses and losses. For example, if your line supervisor is not logging your receipts properly, you will be haemorrhaging money without having any clue why.

Training your employees properly brings many benefits. Explaining your accounts processes and the importance of following them at the point of induction will change the culture of your business. It has the effect of making everyone more accountants savvy. In a firm that takes that approach, everyone will be more motivated to play their part in keeping your accounts up-to-date and accurate.

Hiring the wrong accountant

It is really important to hire a properly qualified team of accountants; ideally someone who is familiar with your industry. A clinician, for example, should always take the time to seek out a medical accountant, as they have a proper understanding of how the sector works. When you hire someone like that, they will be able to produce the special reports you need to secure and maintain funding.

Getting the basics right will put your firm’s accounts on a firm footing. This will ensure you are not scrabbling around at the end of the month, or wasting time trying to comply with regulations at the end of the tax year.

Posted by Peter
October 31, 2018
Accounts

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