5 Key Accounting Errors Small Business Owners Make

accounting erros

If you own and run a small business, keeping good accounting records is vital.

Studies show that small businesses that are bad at bookkeeping are more likely to fail than businesses with good records.

To help you on your way, here are five common mistakes to dodge when bookkeeping.

Mistake 1: Not Reconciling Your Accounts.

One of the things that accountants and tax auditors will look at first is whether your records and bank account balance. Reconciling your bank statement helps confirm that every transaction you’ve made via your bank account is recorded in your accounts.

Your accountant or tax preparer has a lot more work to do, if your books aren’t balanced to your bank account.  This means means higher fees.  If there are expenses that aren’t in your records, that could be claimed as tax deductions, you could also be paying more tax than needed.

If your tax inspector doesn’t believe you’ve recorded things properly, they’ll spend more time  examining your accounts, if you’re audited. It’s important to be organised to balance and reconcile your records to your bank statement at least once per month.

 Mistake 2: Tardiness.

It can be a chore when you’re tired after a long day.  But doing your bookkeeping regularly should help prevent you spending hours uncovering details that you have forgotten.

Mistake 3: Forgetting Cash Payments.

cash payment

It’s common for small business owners to pay business expenses using cash out of their pocket, and not keep a record. These small, regular expenses, can add up to hundreds or even thousands in hidden tax deductions.

Keep an envelope for cash receipts somewhere handy, so they can be added to your records.  Get a receipt for all business purchases, and find a good bookkeeping system that makes recording cash payments easy.

Mistake 4: Recording Vague Transaction Information.

Often, small business owners take bank statements, receipts, or even computer records and have memory lapses when they meet their accountant. This can often be a business death-wish.

Add a description to every transaction when it’s fresh in your mind, especially transactions that won’t be obvious to other people, such as your accountant.  You’ll make your year-end much less stressful, save time with your accountant, and give yourself peace of mind in case of a tax audit.

Mistake 5: Using Accounting Software Above Your Skill Level.

Most small business owners are not trained accountants.  Many accounting programs require a degree of accounting comprehension, so trying to master accounting software, can lead to mistakes.

Of course, you don’t have to try and become an accountant.  There are many specialists to turn to, so you can get on with running your business successfully.  A good virtual accounting service will be worth their weight in gold.  They’ll save you money and give you more time to focus on your business.

0 Comments

Leave a reply

Your email address will not be published.

CONTACT US

We're not around right now. But you can send us an email and we'll get back to you, asap.

Sending

© 2019 onwards CHAKRA PARTNERS LIMITED a New Zealand resident company. All rights reserved. DISCLAIMER

Send us a message

Chakra Partners Limited
217a East Coast Road
Campbells Bay, Auckland 0620
New Zealand
Tel: [64] (9) 449 0417
markg@chakrapartners.com

Log in with your credentials

Forgot your details?