Accounting is somehow very automatically associated with errors. But in the world of Six Sigma and digital devices, this should not be. If accounting errors are still part of your daily business life, you need to re-think your methods of accounting. That’s because bad accounting entries have a direct effect on your business. Here’s how –
Data entry errors
Traditional accounting methods such as manual entry or offline accounting lead to several errors in recording payment data. For instance, if the accountant forgot to record goods and services tax (GST), it may lead to non-payment leading to penalties. Even in case of accounting software, existence of various versions of books of accounts with multiple users may lead to this problem. Legal penalties or payment errors not only lead to unnecessary financial losses but also mar the credibility which is crucial for startups and small businesses.
Repetition or duplication of entries
If a single transaction has been recorded twice and this mistake is repeated a few times in a month, it can create a false financial statement. Failure to maintain accurate finance statements will directly affect your growth projections and eventually your chances of getting investment or capital for the business. This type of errors occurs in manual accounting and offline accounting or accounting applications that don’t have double-entry system.
Giving accounting control to one person
There’s much room for frauds and errors when you leave all of your accounts and financial control to one person. He or she may be staff, an outsourced accountant or accounting firm. Small businesses need to either have a cross-checking mechanism or should have access to books of accounts to confidential users within the company. Online cloud-based accounting allows multiple-user access with admin controls.
Counting sales as income too early
A sales revenue must not be counted unless the product or service has been delivered. A false sense of profitability affects future forecasts that may affect your business directly.
How online accounting helps fix these errors?
– Online accounting eliminates data entry errors — errors of commission and omission — since once the fields are defined and marked, the system starts sending reminders or updates.
– Cloud-based online accounting software such as Giddh allow a double-entry system, so if you record sales revenue, the cash flow automatically increases. This kind of system automatically eliminates errors related to forgetfulness or omissions.
– Online accounting allows for multiple user access so co-founders or the most important people in the business have easy access to accounts. This leads to transparency and reduces frauds.
– Online accounting helps generates payment and income reminders, can send email notifications or reminders automatically. This eliminates the chances of errors of not recording important transactions.
– Another advantage of multiple user access is the elimination of duplication of entries. If one user updates accounts, the records get updated automatically in the system and all the other users are able to see the change.
If you wish to understand accounting in detail or are worried if your learning curve is too long for an accounting software, feel free to share with us.