Tax times are taxing for most business owners with the rush to adhere to all deadlines. There is no reason why that should be. Tax accounting is a critical element for every business owner. By watching out for some common errors, a lot of potentially damaging errors like getting an audit or going out of business can be avoided. Filing taxes on time and keeping your books of accounts in order are absolutely vital to the health of your business.
Here are 4 common accounting mistakes that all small businesses must watch out for:
- Expense receipts are not stored correctly: Business owners make a lot of purchases. There are times when the receipts are not filed or stored correctly. And then there are entries in the Credit card statement that don’t make any sense at all as you just cannot recall what the expense was for. The problem is compounded when personal credit cards are used to make business expenses. Not having a receipt can make you incorrectly report your expenses. You can lose out on precious deductions. The easiest way to avoid this is by having an envelope for this task in your car or on your desk to ensure that you keep all your receipts there. Then at the end of the week, these can be digitally scanned and uploaded to ensure that they are properly accounted for. These days there are many handy Apps on your smartphones that can directly attach digital copies of your receipts to your desktop or laptop.
- Not keeping track of receivables: While it is understandable that every business loves receiving money, it is important that each such receivable is adequately recorded. Each payment received must be matched with a corresponding invoice. If not done on a regular process, this can create a huge confusion in the receivables report. Remember match every receivable with an invoice, even if the final reconciliation is done later.
- Not recording your cash transactions: Cash transactions are often the most overlooked part of accounting. You cannot even rely on your credit and debit card statements here. The only way to account for them accurately is by retaining every single receipt and recording it correctly. If you do not account for your cash transactions, you are missing out on deductions and end up reporting inflated revenue for the year. Avoid that by being more organized in accounting for every cash expense.
- Hiring a professional bookkeeper: Often small business owners prefer to save a little money by handling their bookkeeping tasks themselves. This tends to weigh heavily on their time which could be better utilized by strategizing and planning for the business. Hiring a professional bookkeeper takes away the hassles from accounting and accounting processes. It also enables the business to complete financial obligations on time which will enable your accountant to file your taxes on time. Remember that an expert can help you with up-to-date financial knowledge of deductions and deadlines that can significantly reduce your current headache as well as help you plan well for future financial obligations. As lucrative as it may seem, doing your own taxes could land you in very tricky tax troubles.
Digital software and regular backups can make it easier to stay organized financially for small businesses. Accounting is a vital part of any business. Invest in keeping your accounts in order and avoiding the common accounting mistakes detailed above.