Making good turn-overs and earning a name in the market is every business’ goal. But that’s always easier said than done. Amid other daily managerial priorities, accounting concerns are sometimes forgone and this is something that can potentially bring your business stats down. So even if you are armed with a good accounting team and equipped with great accounting software, you should be careful about these common accounting mistakes, which, if not taken care of, can pose a severe financial threat to your business in the long-run or even lead it toward insolvency.
#1. Sloppy bookkeeping
If you own a small business and if you think that can let you get away with the daunting task of recording small financial details without any risk, you’re wrong. If your records are all sloppy and you’re doing nothing about it, you’re inviting the risk of missing legitimate tax deductions, the pain of time-consuming audits, and maybe the penalties/ sanctions too, if you fail to present adequate data in an audit. So be very particular about bookkeeping as it gives you a real and reliable picture of your company’s financial health. Categorize different types of assets and liabilities correctly and also keep performing a monthly check for any loopholes. Subscribe to accounting software like Giddh to manage this.
#2. Not keeping the bookkeeper updates on business activities
A bookkeeper needs to know about every monetary activity of your business. If the purchase of any product or service, especially ones with recurring monthly costs, is left unrecorded, that will lead to inaccuracy in all of the corresponding financial statements. So make sure that all the cash-flow activities get reported to your bookkeeper in all detail and originality. You can also use Giddh, accounting software with fully-featured book-keeping to make this work easier.
# 3. Not allotting clear budgets to each project
Never get your actions started on a project without assigning it a clear budget. Doing so, you can end up with wasteful expenditure of your limited funds on an unfeasible project, leaving no fund available for the projects that could actually bring you huge returns. So, one, take a good look at the feasibility of a project, two, assign it a budget accordingly, and three, try to stick to the decided limits. You can take the help of your previous financial reports and do a quick analysis with software like Giddh to figure out the relation between scale, type, costing and expected returns of a project.
#4. Not reconciling books with bank accounts
Maintaining account books is useful but if you don’t do reconciling i.e cross-checking the balance in books with that in bank, you can go wrong about your finances. Reconciling helps you ensure that your account balance is accurate and lets you know your real bank balance. For small businesses, this should be done monthly. If you want to make this work easier, start using Giddh which automatically syncs with all your bank accounts and hence keeps a track of your recorded and actual balance.
#5. Not categorizing employees and contractors separately
If your business team has employees as well as contractors and if you’ve not categorized them separately in your records, you’ve been wrongly doing the accounting all this while. You need to understand the difference between an employee and a contractor and the way accounting for both has varied consequences. So to get accurate business recordings, be sure of having this categorization.
For further assistance on accounting problems, team Giddh is readily available.