Whether you are running a small or a large business, it is absolutely essential that you remain on top of your bookkeeping and that you leave yourself in a situation in which everything is running smoothly. Without being built on a solid accounting department, you can end up in the type of situation that involves a shaky foundation on which everything is put at risk. As well as the things that you need to get right, there is also plenty that you need to avoid getting wrong. Sometimes, it is the same type of errors that are made time and time again that you really need to steer clear of. So, with this in mind, the following blog post is going to be all about the top bookkeeping errors that your business may well be making and how you are going to put yourself in a situation in which you are steering clear of these as much as possible.
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Trying to Take Care of Everything for Yourself
Obviously, this is the kind of mistake that tends to be made by small business owners. Not only can doing all your own bookkeeping lead to a situation in which mistakes are easily made, but it can also end up being the case that a lot of time is taken up doing all this. Of course, this time is precious no matter what sort of business is being run. It could be spent better or other aspects of your company rather than simply trying to iron out the most tedious accountancy issues. You have a couple of main options that can help you to solve this particular problem. First of all, there is the choice to have people hired in-house, which will help ensure that you have a decent level of control over what they are doing. Apart from this, there is also the option to look at experts in their field, such as Mike Savage New Canaan residen. Ultimately, there is a lot to be said from getting expert advice, particularly in such an essential business area as your bookkeeping and accountancy.
Not Making the Most of Accountancy Software
When computers came along, it made no sense to continue doing your books with an old ledger. Well, this remains the case now that accountancy software is so readily available and always improving. So many different processes which had to be done manually can now be automated to a much higher degree. You should certainly make the most of this software to ensure that your job is made all the easier. As well as preventing errors from starting to creep into your books, it can also help when it comes to saving time, which is obviously highly precious in the life of any business. When you are choosing the right software programs, you need to make sure that your team is fully comfortable using whatever you choose for them to prevent ending up in a situation in which mistakes could be made. Obviously, it is likely to be the case that some sort of training is going to be required along the way, so it is useful to think about what you are doing on this front.
Not Drawing Up A Proper Lease Amortization Schedule
You need to account for your lease liability properly. If you lease machinery, computing equipment, etc., then you’ll have to represent these in your accounts properly. Remember, accounting for leases now follows ASC 842 instead of the old standard, 840. Nowadays, since the new lease accounting standards, there are far more leases on the balance sheet. So, you need to get your lease amortization schedules right. A lease amortization schedule is basically a table that shows your company’s lease payments along with interest and amortization calculations. There is accountancy software that can help you do this, but a lot of business owners and even accountants will draw up a lease amortization schedule in Microsoft Excel to help them with their calculations.
The usual five-column spreadsheet is easy to create and allows you to get a better grip on your finances going forward. It also enables you to account for your leases accurately. An excel spreadsheet here can help you to double-check your lease accounting software and give you peace of mind, especially if you have some complex lease accounting arrangements going on. If you don’t draw up a lease amortization schedule, you might make mistakes. Remember, the schedule is all about showing how you’ve paid down the asset over time, if you don’t account for this outgoing accurately, it’ll negatively affect your overall accounting effort.
Failing to Make Bookkeeping a Priority
When you are running a business, you obviously have all sorts of different plates that you are trying to keep up in the air at all times. This also means that certain areas of priority can end up slipping down the list. However, bookkeeping is one that should never be overlooked. The proper financing of a business is its foundation and everything that it is built on. Without it, you can easily find that your company does not maintain the right levels of cash flow. Not only this, but you are never going to be able to work out how much money you have to invest and what you are able to do to grow your company in the future. Ultimately, correct record keeping should be put right at the top of your list of priorities rather than one that is allowed to slip too far down the list.
Poor Record Keeping
Ultimately, if proper records are not being kept, this can end up coming back to the accounting department, but it can also affect the whole company. Without fully knowing and understanding what is going on in your business finances, this can lead to poor decisions being made that are not fully appreciative of the facts of what is going on. So, you should make sure that records are kept and maintained as best as possible. One of the top ways of doing this is by making sure that your business and your personal accounts are kept separate. This way, you are not going to end up in a situation in which you need to comb back through the accounts to work out exactly what is going on. Record keeping is something that always has the potential to be improved, and it is a useful idea to keep a close eye on exactly what is going on.
The art of business is one that is largely based on good communication. There is no point in ending up in a situation in which your accounting team is not speaking to the rest of your organization as you can end up making poor decisions as a result. There are so many pieces of communication software out there in the modern world, but this does not mean that everything will be automatically improved as a result. Therefore, you need to look closer at the structure of the company as a whole and how well your staff members are getting on with one another. Doing everything that you can to foster a positive team environment should certainly be made a number one priority at your company as a whole.
Letting Your Expenses Get Out of Control
Obviously, there are all sorts of legitimate business expenses that could end up being charged to a company, but if you do not keep a close eye on these, it is all too easy that they are going to get out of control. Therefore, it is important that you manage these as much as possible and not start to let them spiral out of control. It is especially the case with a smaller company that this issue can have an existential crisis on everything you are doing and your whole business can suffer as a direct result of this. If there is a particular problem that you are starting to identify, it is important that you work on that as a starting point and then begin trying to put your finger on exactly what is going wrong and what you are going to be able to do to put it right.
Not Making an Effort to Improve
Like all other aspects of a business, bookkeeping can be taken firmly in hand and efforts can always be made to ensure that you are improving at all times. Otherwise, you can end up in a situation in which the accounts start to get confusing, and you are wasting time that could have been saved by simply taking the time to fully review the overall processes that you wanted to put in place. Ultimately, keeping a close eye on your financial situation can really make the difference between the success or the failure of your company, so it is something that cannot be overlooked for any reason whatsoever.
Not Paying Yourself
Sometimes, you can get into a situation in which you are so focused on beefing up your business that you forget to pay yourself. This is particularly the case when a company is first starting out. However, without looking after yourself, you are never going to be able to tell whether or not you actually have a viable business prospect in front of you. Therefore, you should get into the habit of ensuring that you channel off a percentage of your profits in order to get yourself paid.
Failing to Chase Invoices Hard Enough
If the cash flow situation at your business collapses, you are simply never going to be able to put yourself in a situation in which you can stay afloat and keep growing in the future. A big part of this comes down to making sure that you keep on getting paid on a monthly basis. While it may not be the favourite part of any person’s job to keep having to chase up invoices, without doing this vital task, you can easily find yourself in a situation in which you have established a precedent and clients keep consistently failing to cough up when they should. The chasing of invoices should be made a priority, but you can also create a situation in which you incentivize early payment with discounts and other benefits. You can also keep a closer eye on which clients are paying consistently on time. On the other side of the coin, you should also work out which ones are always late. It may be that the latter category represents businesses that you may not want to keep working with.
Messing Up Your Taxes
The tax situation is one that can go one of two ways. First of all, you can end up underpaying, which means that you are going to have to pay them back further down the line if you are caught out or audited. This could also lead to a situation in which you have additional fines that need to be shouldered, which is obviously a problem – particularly if you are running a smaller company. Alternatively, you could have issues with your taxes that mean that you are paying too much than you should be. Again, this is the kind of situation in which the right Bookkeepers in Vancouver or accountants can go such a long way towards solving the problem for you rather than letting it fester and become too problematic. You don’t want to get tax wrong when in charge of a business, as it could lead to serious issues, including fines and criminal charges.
All of these bookkeeping errors can occur in businesses of any size, and efforts should be made to stamp them out as much as possible. Otherwise, it can easily be the case that you are not managing the financial situation at your business closely, and all sorts of other negative knock-on effects can easily start to occur as a direct result of this.