Small business owners never run short of responsibilities. Often, the owner must perform a multitude of tasks out of necessity. Budget limitations make it impossible to outsource everything. Mistakes can and do occur when an entrepreneur is overwhelmed with various duties. Certain mistakes won’t yield too much of a negative impact. Accounting errors, however, might create massive problems for a small business.
While skilled in many ways, a small business proprietor might not be an accounting expert. Complex accounting duties really should be left to experts, but small business owners cannot shirk every accounting-related requirement. To cut down on the chances of any mishaps, entrepreneurs may wish to review the following five tips:
1 – Don’t Put Off Any Bookkeeping
Any and all financial or other accounting transactions should be logged immediately. If this means writing things down on a notepad and adding them to an official ledger later in the day, so be it. Do not make the mistake of putting off any additions to a logbook. Such an approach leads to forgetting things or becoming guilty of an omission. Diligence with accounting keeps books from becoming incomplete and haphazardly compiled.
2 – Use Reliable Accounting Software
Advanced accounting software may be downloaded to a computer or smartphone. Using this software could very well make keeping tabs of dollars and cents a lot easier. Writing things by hand works in a proverbial pinch, but software programs make for better, easier to organize ledgers. Additionally, these programs may be able to perform accurate statistical analysis and calculations.
When downloading software or an app, look for sites that provide user reviews and ratings. Good reviews generally indicate the true value of a program.
3 – Itemize and Accurately Log All Expenditures
A company must keep tabs on how much it is spending in order to properly determine its profit margin. Carefully logged expenditures can be examined from a perspective of necessity. If money is being spent on unimportant things, then the spending might be cut back. A careful look at all expenditures allows for determining what expenses may be tax deductible.
Steps such as these are made easier when all expenditures are properly accounted for an itemized. And “all” really does mean everything. If a business owner wants a completely accurate assessment of where money has gone, he/she needs a thorough accounting of all expenses.
4 – Audit Your Books More Than Once Per Year
“Auditing” may sound like an ominous word, but it really isn’t. Consider auditing to be a synonym for double-checking. By going over the books closely and thoroughly, mistakes can be discovered. An immediate fix to the mistakes can then be performed. The accuracy of the books returns to an acceptable level once corrections are made.
While this can be performed once per year, the amount of material to go through is going to be significant. Checking the books once every three months could be better. Some may even choose to perform monthly audits. Small business owners may wish to experiment with methods that work best for them.
5 – Don’t Add Any Personal Expenses
Putting personal expenses into a business ledger creates all sorts of problems. Even if the items are marked as personal expenses with notations not to include them in profit/loss or tax margins, putting them in the ledger remains a bad idea. Some may choose to take a loan from the business to cover personal expenses. Repayments can be noted, but steps like these create problems.
Mixing up personal and business expenses convolute the books. Keeping personal items out enhances simplicity, which makes the books easier to review. Bookkeeping can be difficult enough without making things more complicated by putting things into a ledger that shouldn’t be there.