• New Wave Accountants

Typical Small Business Accounting Errors That Affect Growth

If you're a small business owner, you want more than minimal success: you want your organization to thrive! Unfortunately, this endeavour is more complicated than keeping the lights on and to succeed in business, you need accounting expertise. Since many other details need attention, accounting ends up being overlooked.


It's no surprise: accounting is neither fun nor remotely attractive. Moreover, business owners usually don't have the background and/or training needed for this area.


The following common pitfalls are likely to reoccur with regularity for anyone running a small business. If you take care to avoid them, you'll go a long way towards assuring your business' growth and success.


THE ERROR: Business & Personal Accounts Not Being Separate


It's crucial that banking, books and even credit cards are separate in the personal and business sense. This is true even for people who have a pass-through business. Failure to do so will make paperwork incredibly muddled, especially during tax seasons. It will be practically impossible to determine what capital investments will generate profit and which expenses are deductible, among other things.


THE ERROR: Not Making Use of Accounting Software


Accounting software is a great way to solve all of the tricky problems that come with accounting. You're far less likely to make a mistake if you use software to do the numbers rather than doing everything by hand. After all, given how exact accounting is, even being one number off (or the wrong decimal point) can send everything into a messy spiral.


Thankfully, there is a lot of software available in the market; choosing the best one will require some research. Bear in mind that while it seems like a lot, you don't have to be overwhelmed. Read reviews, take your time, choose something that will specifically meet your business' needs.


Some key requirements the accounting software you choose must have include:


  • Account to accept credit card payments

  • Budget planning

  • Contacts management and contact history tracking

  • Financial statements, cash flow statements and balance sheet

  • Generating Invoices

  • Inventory management

  • Payrolls

  • Sales tracking

  • Taxation


THE ERROR: Not Producing Financial Reports Monthly


Many small businesses in particular tend to gloss over just how crucial financial reports are. The logic is that producing an overview of sorts twice a year or every couple of months is enough. Unfortunately, that's skewed logic and definitely not enough at all.


A monthly financial report is necessary if you're looking for additional investments and/or have financial backers. They will use this as a tool on their end. It's also a good show of faith in terms of how seriously you're taking their investment.


Monitoring the company's financial activities closely will help to nip any issues in the bud since they're spotted early enough. Examples of this include oversites in accounts payable and slow-paying clients, among others.


Conclusion


Small businesses need to grasp their accounting early on in the process, something which unfortunately gets overlooked often. A good rule of thumb is to call on a professional. Avoid typical errors such as not separating personal and business accounts and not producing monthly financial reports.


Looking for a small business accountant in the Gold Coast? Reach out to New Wave Accounting today! We help scale and grow businesses through end-to-end accounting and bookkeeping services.


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