Small business accounting is necessary to keep your books for tax purposes. Also, it can help you save money as well as prevent identity theft, fraud, and waste. This is the reason you must hire a Phoenix accountant rather than handle your books yourself or delegate the task to an inexperienced employee. Accounting mistakes can cost you significant losses due to unpaid taxes, theft, embezzlement, or fraud. These mistakes can include data entry mistakes, basic math errors, and failure to document income and expenses. Below are common accounting mistakes that small business owners make:
Not Organizing Accounts
Accounting involves keeping receipts for expenditures, keeping the business books up-to-date, using business cards for expenses, recording petty cash expenses, as well as separating business and personal accounts. As a business owner, you can pick up supplies while you shop for personal items. But receipts for business and personal expenses should be separated. By being able to show receipts for expenses, you may not be challenged by auditors for them.
Not Staying on Top of Paperwork
If you are taking on many roles as a business owner, you may put off the bookkeeping tasks. But this can leave you behind on reports, financial statements, bill payments, sales tax payments, and customer billing.
Delayed billing can lead to bounded checks, invoice mistakes, and increased debts. You can face penalties and interests when you don’t file reports on time. Also, if the books are not current, you could lose significant financial opportunities. And when you don’t have enough time to take care of everything, you end up rushing things, leading to mistakes and inaccuracies.
Usually, the IRS discovers errors in numbers and corrects them on your behalf. But you cannot rely on them to do this for you. Also, other types of math errors cannot be identified by the agency. These can have a serious impact on your finances. Such errors include not entering numbers in the right place, not rounding off numbers properly, or making unfavorable mistakes.
Not Hiring the Right Staff
You cannot trust your books to just any employee. Otherwise, mistakes and inaccuracies can occur. You need a certified accountant to handle them for you. Also, not hiring the right accounting staff can result in criminal activity such as theft or embezzlement. You can choose to either hire an in-house account or outsource the accounting tasks to a reputable firm.