While most business owners are understandably focused on the day-to-day actions and operations that allow their business to run, smart and accurate accounting is the backbone of any company.
If mistakes are made when it comes to accounting, it can have a world of impacts on a business’s bottom line. Internally, incorrect reporting can lead to an inaccurate picture of income or expenses, and poor decisions based on false economic information. Externally, mistakes in small business accounting can result in legal trouble, especially regarding IRS audits and other financial hurdles.
Enlisting a small business accountant is the best way to ensure accurate accounting and reporting. An accounting and tax services expert for small business owners can help you stay compliant.
A small business accounting services partner can take a heavy load off a business owners’ shoulders by ensuring that all financial data is 100% correct. They can manage your daily expenses and income, and broad financial analysis that can shape a company’s future.
In the meantime, when reviewing your accounting actions, be sure to avoid these common mistakes that can lead to miscalculations and trouble down the road.
Not Tracking All Your Expenses
Most business owners can track routine expenses like utilities, rent, supplies, and other everyday necessities. However, it’s essential to keep tabs on every expense your business incurs to minimize your taxes and receive the most potential deductions and credits.
For example, deductions can be taken for various work-related endeavors. For instance, you are traveling to a trade show, taking a continuing education course, or investing in new marketing channels and campaigns.
Tax laws which include potential deductions and credits, are constantly evolving. Therefore, it is important to take full stock of every penny you spend within the realm of your business. This is the key to making the most of these deductions and credits.
Not Paying Attention to Cash Flow
It’s not unusual for business owners to overstate their cash flow. Additionally, this can impact your ability to pay employees, pay vendors, and fund essential or emergency business expenses. Be sure to monitor your cash flow and maintain an extra surplus of funds in a savings or other separate account. That way, a safety net is constantly available in case an emergency arises.
Delaying or Forgetting Invoices
Outstanding invoices can have an invisible impact on your overall accounting. So, for the most accurate financial reporting, pay invoices as soon as they are received. (This also allows business owners to avoid late fees that may come into play if an invoice is unpaid after 30, 60, or 90 days or more.) If immediate payment is not possible, then at least keep the unpaid invoices in mind and account for them when determining your income, expenses, and overall cash flow.
Not Tracking All Your Income
Over-reporting or under-reporting income is a common issue for small business owners. This is especially true for owners who receive income from multiple sources. With hefty potential tax consequences for misrepresenting income (including the risk of an audit), keeping tabs on every dollar coming into your business, even the most minor amounts, is essential.
Mixing Business and Personal Accounts
Mixing your finances with your business finances will create a lot of extra work when it’s time to pay your taxes. Therefore, you can easily make personal and business accounting mistakes. Be sure to keep separate financial records across the board to avoid complicated and messy accounting or financial reporting in the future.
Not Keeping Your Records Accurate
It’s easier than ever to track all expenses and income online, and going paperless is a great way to streamline your day-to-day accounting. That said, you should keep track of all records, receipts, and other financial data for the last seven years, just in case the IRS audits you in the future.
Having an Ineffective Small Business Accountant
When it comes to accounting services for small business owners, not all firms are created equal. This is why it’s essential to have an established and experienced accounting firm as your resource so that your company’s finances are always sound and accurate.
At Saddock Advisory, we assist businesses of all sizes through all aspects of strategic financial planning and reporting, from daily operation expenses and income to larger plans for the future.
Reach out to us today to start the conversation. Discover how we can use our decades of experience for your company. With a skilled small business accountant, you can focus on growing your business and enjoy peace of mind, knowing that your personal and business finances are being meticulously managed.