How to Avoid Common Small Business Accounting Mistakes ...

If you are a small business owner determined to beat the recession and keep your doors open, you?ve got to have your eye on each and every issue that could potentially trip you up. That means not overspending or wasting supplies, keeping only necessary staff and rewarding them for their good work, and promoting your brand in such a way that it can compete with larger corporations. However, accounting mistakes can trip up all the good work you do in these areas, leading to lost revenue, departing customers, and even trouble with the IRS. Here are a few of the most common small business accounting mistakes, and how you can avoid them.

One mistake that even the smartest small business owners make is not having clear procedures when it comes to their accounting. Some entrepreneurs play fast and loose with their personal accounting, which makes them think they can just wing it and get by with their business accounting. But that?s just not the case. And if you have more than one employee managing the accounting, you?ve got to have rules in place to make sure every detail is handled the same exact way. That will reduce the chance that something important is missed, and help you approach tax time calm and prepared.

Data entry errors can be devastating, and there?s really no way to avoid them. Accounting data entry is dense, and it?s all too easy to miss a zero or switch some numbers around. Sure, you can accept a small amount of errors, but the fewer the better. And the best way to prevent them is to have all of the data entry reviewed. Reconcile each and every spreadsheet to its appropriate account, and mistakes won?t go undiscovered for very long. Do this at least once a month and you?ll be sure than small problems won?t become larger.

Although it?s hard to believe, some small businesses actually work without a budget. If you run a small shop, you might think that the fact that you know how much money being spent is enough, and you don?t need to waste time with a detailed accounting budget. That?s one of the biggest mistakes you can make. Just because your business is working as is doesn?t mean it?s working as optimally as possible. Start with the last two months of expenses to give you a baseline, and then create a budget for the following month. You?ll be able to adjust it as you go along, but even if it?s not quite right it will help you far more than simply keeping an eye on expenses.

Finally, many small businesses are very disorganized with their record keeping. This will certainly come back to bite you when tax time rolls around. It may be that you?re not categorizing the company?s expenses, or not noting down enough detail to satisfy a potential closer look by the IRS. Or maybe you just have an outdated filing system, which can?t satisfy your receivable financing definition or the growth you hope to experience. Just remember that the situation is never too far gone. Create a chart of all accounts and go back to the beginning of the current year to categorize. You can?t change the past, but moving forward with strict organization will help you save money and avoid costly legal troubles.

Tagged as: accounting, bookkeeping, IRS, small business, taxes

Source: http://www.scottonmoney.com/how-to-avoid-common-small-business-accounting-mistakes

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