Seven Small Business Accounting Mistakes and How To Avoid Them

If you’re a small business owner, your plate is full with managing the day-to-day operations. You have to remember though, that if you’re a business owner your motivating factor – at the end of the day – is to have a balance sheet that isn’t in the red, right? While it’s true that to be successful you need to focus on your core competencies, you also need to keep an eye on the bottom line. For many entrepreneurs, it’s simply easier to contract out their bookkeeping and accounting to a qualified professional.

We’ve been in business long enough and have worked with many entrepreneurs across a diverse array of industries and this is what we’ve found to be the top seven financial recording keeping mistakes (and how you can avoid them!):

  1. Using the “shoebox” system to “file” invoices, receipts, receivables. You need to have a record keeping system in place from day one.
  2. Not following up on overdue invoices. You’ve performed a service or provided products in a timely fashion and deserve to be compensated. Note on your invoices when they are due and also note that there will be an additional charge if not paid on time. When invoices are close to being overdue, call the client and remind them and also remind them that there will be an additional fee if the invoice is not paid.
  3. Not invoicing clients in a timely fashion. Invoices should be sent (whether mailed or emailed) immediately after the product is delivered or the project has been completed.
  4. Putting record keeping and accounting matters to the bottom of the To Do list. Record keeping needs to be a priority. If you don’t know whether you’re making money, you also don’t know whether you’re losing money.
  5. Having a record keeping system in place but not being meticulous in its upkeep. If you have a record keeping system but you’re recording incorrect deposits, not tracking all of your expenses, or not depositing funds into the correct account you are impacting your bottom line and could also run into issues when you file your taxes.
  6. Speaking of taxes… you need to know what your tax obligations are and when you need to file. If you file incorrect amounts or neglect to file any paperwork with local taxing authorities your business could face substantial fines and penalties.
  7. Handing off your financial recording keeping to someone else and not being involved at all. Whether you hire someone to work in your office to track your income and expenses or contract with an accountant, you still need to be involved. The individual who “does your books” should keep you informed of your financial status and provide timely updates. He or she should also be available to help you chart a new course if your business is operating in the red.

What steps can you take to make certain your record keeping is correct from day one? Here is our advice:

  • Make certain whatever accounting system you set up works for you and your particular business
  • Consider hiring an accountant as part of your team – the fee you pay is well worth it in the long run financial health of your business
  • Don’t put off your bookkeeping or accounting tasks. These tasks, even if it’s as simple as gathering receipts and invoices to take to your accountant should be done on a regular basis.
  • Set aside time each week to go over your financials, this is especially critical in the beginning phases of your business.
  • Outsourcing your accounting doesn’t mean that you take a hands-off approach to your financials. You need to be involved in every aspect of your business if you’re going to be successful.

The approach you take to your bookkeeping from the day you open your doors will go a long way in helping you realize a healthy cash flow.

If you need help with your small business accounting, we would love to add you to our list of satisfied clients. Give us a call today at 480 – 355-1398 to set up a complementary, no obligation consultation.

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