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Keeping on top of your finances is key to business growth, but it can be tricky to simultaneously manage all of the accounting and effectively run your small business, especially in the early stages.
As a result, many business owners develop some bad accounting habits that can cost their business valuable time and money in the long run - and can be a nightmare to rectify.
To make sure you don’t slip into this downward spiral, we’ve pulled together a list of common small business accounting mistakes you should avoid - helping you to keep your accounting processes simple, accurate and effective.
We’re all guilty of putting things off but, when it comes to your business accounting, your procrastination is only going to make your life harder.
Granted, balancing the books doesn’t sound like the most riveting task in the world - but if you don’t take the bull by the horns and get it done early, you’ll often find balancing your books takes you longer than it has to.
Instead, put aside an hour each week for doing your accounts and stick to it. It’s far quicker and easier to input your incomings and outgoings as they happen each week than it is to record these in bulk every few months (or even less frequently).
Plus, the longer you leave it to do your accounting, the higher the risk that your books will be littered with errors as expenses are missed and receipts are lost or simply forgotten.
An important part of running your small business is managing and monitoring your cash flow - but some small business owners struggle with this process due to inaccurately and inconsistently tracking their costs.
This can be avoided by taking the time to ensure you’re inputting accurate figures for your income and expenses. Double-check all of your costs and cross-reference them to ensure everything tallies up and your books balance. Simple!
It’s equally important to be consistent with how you track your expenses, making sure you’re tracking costs the same way every time.
Keep the formatting uniform each month and be vigilant with your categorisation, making sure costs are recorded under the correct category - including recording repeat costs like subscriptions under the same category every time.
Small business accounting doesn’t have to be complicated. The high-level goal is to record incoming and outgoing payments to and from your business.
Despite this, it’s surprising to see that many companies seem to get themselves in a pickle with this process - making their accounting system far more complicated than it needs to be.
Depending on the nature of your business, try to find a platform that offers a simple yet robust accounting system that works for you. Many platforms offer additional features that may not be relevant to your business, such as issuing invoices, so ensure you don’t waste any time inputting data you simply don’t need.
Human beings are creatures of habit. Often, we do things one way simply because that’s the way we’ve always done it - but that can often mean we unnecessarily cling on to inefficient processes. Accounting is no different.
We often see business owners carrying out processes such as manually uploading every receipt or printing out invoices and posting them, just because they don’t know another way or, perhaps, they think that shaking up their processes will be more time-consuming than continuing as they are.
The reality is that these small tasks are a drain on a valuable resource: your time. Instead, use modern technology like expense management apps and finance software to automate these processes. This will simplify and speed up your accounting - leaving you with more time to focus on other areas of the business.
To make sure you’re not left with any unnecessary headaches when it comes to your small business accounting, be sure to keep these cautionary tales in mind.
As with most things, giving your accounts the right amount of time and attention to detail will go a long way towards making them quicker and easier to track.
If you’d prefer to get a professional view on your small business’s books, we’re always happy to help. Simply get in touch with our expert accountants today to chat through your unique requirements.