4 Common Accounting Mistakes Small Businesses Should Avoid
Every small business should practice proper accounting because recording and monitoring your financial transactions is paramount in maintaining your company's financial health. Yet, many small businesses are confronted with accounting problems because they tend to commit accounting mistakes that hinder the growth and expansion of their business. Additionally, they fail to realise that proper accounting is instrumental in helping their business grow and flourish over time.
In this article, we will share with you four common accounting mistakes that will be unprofitable to your small business.
1. No bookkeeper or an accountant
As a small business, you would typically have two routes to take: manage the finances of your business by yourself or outsource the task to an accountant expert. However, many owners choose the first option thinking that they would rather take full control over their finances. This option won’t be a problem if you are a financial expert, but without proper knowledge and financial skills, this can be a risky move for your business growth. If you are facing such a situation, your best option will be to hire an accountant to oversee your financial health.
2. No bank reconciliation
When it comes to bookkeeping and accounting, bank reconciliation is the process of matching the cash balances on your balance sheet and the corresponding amounts on your bank statement. Financial differences should then be reconciled so that no discrepancy or fraud is committed. Unfortunately, some small businesses do not perform a bank reconciliation. Keep in mind that forgetting to reconcile your company's books can translate into ineffective accounting that can compromise your business finances.
3. No recording of small out-of-pocket expenses
Small out-of-pocket expenses may seem insignificant at first, but when added up, they can compromise a large portion of your business finances. The problem, however, is when you fail to record these small expenses. Know that not recording your financial transactions, even small ones, can lead to two situations: inaccurate financial records and compromised financial health. As a result, your financial income may look healthy, but in reality, your business is in dire financial situation.
4. No clear budget for a new project
In any given business, coming up with a new project every now and then is common. It’s also easy for you to get excited and immediately jumpstart a particular project, with the profit in mind. The problem, however, is when you fail to set a budget for your new project. Know that most business pursuits require funding, whether big or small, which is why you should set a budget in place so that you won’t start off on the wrong foot. The worst thing that can happen is if you won’t be able to sustain this project in the long run due to the lack of financial resources.
It's easy for small businesses to fall prey to some accounting mistakes. But by hiring a business accountant on the Gold Coast, they can rise above the occasion. A professional accountant will perform bank reconciliation, do proper accounting for petty cash, record small out-of-pocket expenses, and many more. Ultimately, a professional accountant will maintain your business's financial health and ensure that your small business will thrive and succeed.
New Wave Accounting is an accounting firm that helps businesses reduce taxes and maximise profits. If you do not want to risk making mistakes that can harm your business’s growth, hire a professional small business accountant in Gold Coast to look after your accounting practices instead!