3 Common Business Accounting Mistakes to Avoid
Every business needs bookkeeping and accounting to stay financially healthy since both functions ensure you can stay on top of all the money coming and going out of your company. Despite the critical role accounting plays in every successful business, start-ups often overlook its importance.
Poor bookkeeping and accounting practices can only put your business in jeopardy the longer it persists; that’s why we’re here to talk about these common mishaps so your business can address them before it turns into a full-blown financial crisis.
Mistake #1: Thinking Profits Mean Better Cash Flow
Since cash flow tracks the money that enters and exits your business, it’s understandable that the profits you make should translate to a positive cash flow, right? Unfortunately, potential profits will not do anything to increase your company’s health unless it’s already completed.
This means that it’s easy to mistake your financial status as healthy if new deals are lined up, but so long as it isn’t there in your accounts yet, then it shouldn’t be part of your cash flow. After all, what happens when there’s a delay in payments? You’ll be losing more money than you gain once the project finally reaches its conclusion.
Mistake #2: Failing to Take Financial Records Seriously
It’s easy to focus on bigger revenue and expenditures, but it’s critical to record every financial transaction you make, no matter how small or large. For one, you’ll need to stay on top of your expenses if you want a clear and accurate picture of your financial health and overall performance.
Additionally, tracking your daily expenses gives valuable insight into your financial responsibilities, allowing you to see areas where you can cut back or improve. These daily figures should also outline a better budget for your company to allocate your spendings where it can generate the most value for your bottom line.
Mistake #3: Forgetting to Reconcile Books with Your Bank Accounts
As mentioned above, there are plenty of instances where businesses can let small expenses go unrecorded. Even if it’s just a few dollars, any expenditures can change the balance in your professional bank account, which can spell out trouble for you once it’s time to file for your tax returns.
With that in mind, it’s important to reconcile your bank statements regularly to ensure your data entries are accurate and up-to-date. It also ensures your financial statements reflect your bank account, plus it allows you to spot any irregularities that need fixing before submitting your reports.
The Bottom Line: Prevent Falling Behind in Your Accounting by Avoiding Common Financial Mistakes Small Businesses Often Make
Without a proper accounting system in place, your business can run blind since it depends on your books to track profits, monitor expenditures, provide investors, and even keep you compliant.
How Can New Wave Accounting Help You?
We are small business accountants in the Gold Coast that provide end-to-end accounting and bookkeeping services to help scale and grow our client's businesses. Having worked with over 600 businesses, we understand how small businesses tick, giving you better money solutions that will help you flourish. Reach out to us today!