Businesses of all sizes can make costly accounting mistakes. While some errors seem small, they can still result in significant loss over time and they are not always easy to correct. Avoiding the most common accounting errors may help you improve your accounting practices.
Failing to Keep Track of Small Transactions
Every transaction that you make should be recorded, even the use of petty cash. When you fail to record small transactions, it becomes easier to neglect your bookkeeping. This is a bad habit that can result in additional accounting errors.
By keeping track of every transaction, you get in the habit of properly managing your books. As your business grows, it is important to ensure that your bookkeeping practices are accurate as minor transactions can become a major problem for larger businesses.
Not Reconciling Records with Bank Accounts
Accounting discrepancies, unexpected fees, and additional charges along with failing to record small transactions can lead to inaccurate records. Over time, your books will not match the real balance of the business bank account.
Reconciling is a necessary account step that is easily overlooked. You should occasionally reconcile your records with your bank accounts to ensure that everything matches. If you notice a difference between the recorded value and the real value in the bank account, take the time to find the cause of the discrepancy.
Treating Your Profits as Positive Cash Flow
When you close a deal, you may not receive immediate payment. Treating the anticipated profit as current cash flow may result in financial difficulties.
Even if you receive an up-front payment, the project may take several months to complete. During this period, you may have expenses related to the project that impact the profits.
For example, a client pays you £5,000 to complete a project that will take two months. You assume that you will need to spend £2,000 on expenses for the project, resulting in £3,000 profit. However, until the project is complete, you cannot predict all your expenses with complete accuracy.
Handling All Your Bookkeeping Internally
Many small businesses employ a bookkeeper or handle their own bookkeeping while larger organisations may have entire accounting departments. Regardless of the size of your business, you should occasionally seek outside assistance to review your accounting practices.
Business owners may overlook important tax deductions or fail to comply with specific employment regulations or taxes, along with the errors discussed. These errors can become costly. However, you can avoid many of these issues by scheduling a detailed business accounting audit.
Schedule a Thorough Accounting Audit
An audit allows skilled accountants to examine your bookkeeping. The goal is to uncover any discrepancies or errors in your bookkeeping and find ways to improve your current accounting methods. Visit http://bap-international.com/ for more information on accounting services, including accounting audits.
Accounting audits are beneficial for numerous reasons. Along with helping detect bookkeeping mistakes, accounting firms can help you with compliance and possibly uncover tax deductions and accounting methods that may save you money.
An accounting firm can provide unbiased accounting advice and recommendations. With the assistance of experienced accountants, you can ensure that you use the best accounting practices.