Everyone makes mistakes from time to time, but you should try not to do anything that can have serious consequences for your business. For example, clerical errors in accounting can put your bottom line in jeopardy if they are left unchecked. The emergence of online accounting tools has made it easier to keep accurate records, but such tools won’t prevent you from making mistakes with your accounting.
However, you can avoid such mistakes by becoming aware of common pitfalls and nipping problems in the bud. Not only will this save your business time and money, but streamlining your operations also gives you a competitive edge. In this article, we’ve made a list of the most common accounting errors and the best ways to avoid them.
#1 – Failing to Follow Accounting Procedures
Businesses of all types and scales are required to strictly follow a formal, documented, and detailed accounting procedure to ensure all tasks are performed accurately and consistently. After all, accounting goes beyond crunching numbers for your company. It also involves gathering valuable data from vendors, contractors, and customers.
One way to maintain procedures is by developing standardized forms and checklists, which should include the vendor or customer’s name, address, telephone number, insurance certificates, signed contracts, and Business Number (BN). This will enable your business to run smoothly and process payments with minimal oversight.
#2 – Forgetting to Record Small Transactions
It’s easy to overlook petty cash transactions, but you need to take all of your expenditures into account no matter how insignificant they may seem. Even the smallest mistake can lead to an inaccurate conclusion, which will affect your company’s overall accounting records. Staying on top of all transactions makes it easier to manage big ones and leaves little room for miscalculations.
#3 – Failing to Categorize Income and Expenses Properly
To show financial transparency and maximize profitability, it’s crucial to know where cash is coming from and how it is spent. Categorizing a company’s income and expenses is a tried and tested way of having a clear overview of all transactions, including rent, utilities, wages, office supplies, and more. Separating a company’s income from its expenses enables business owners to set up a budget. It will also allow for the creation of accurate financial records, which are needed for tax purposes. Such records will also help you determine where you can cut back on your spending.
#4 – Failing to Reconcile Books with Bank Accounts
Sometimes small expenses may go unrecorded, which is why it’s important to reconcile books with bank accounts to see to it that the data listed is correct. This can be done by checking an account balance and ensuring that it matches what’s in your bank account. This prevents a company’s books (from your business’s bank cash to its payable accounts) from becoming out of sync and provides you with a clear and full overview of your company’s financial situation.
We understand running a small business is complicated. Your financials shouldn’t be. Take the guesswork out of the accounting and let us help you build your blueprint for success.
Contact us today for your free assessment to find out how Blueprint Accounting can support your business.