Not critically overlooking your accounting and revising can lead to unnoticed mistakes, which later can turn into a massive hole in your pocket.
This article for business accounting will help you give an overview of the accounting mistakes you must avoid by providing an overview of how to prevent your accounts from occurring at fault. So, let’s dive into it.
Inappropriate records
With the advancement of technology, record keeping has become easier than before as you can digitally keep all the records and maintain proper filing of the accounts. Records are essential for you to keep because they approve of the legitimacy of your business expenses. If you decide to sell your company organization, the buyer will request an external audit of your company’s financials which will show the expenditure of a business.
Proper documentation will be required to prove the accuracy of your business’s financial statements; hence, it is imperative to maintain appropriate records. Another benefit of record-keeping is that it prevents employee fraud as they have to submit it for their purchases resulting in less likelihood of stealing business funds for personal expenses resulting in less fraud.
Therefore, maintaining and procreating records is crucial to avoiding inappropriate record keeping. You can use specified apps such as Receipt Bank and Hubdoc to establish a proper system for maintaining records by making record keeping easy.
Incomplete Checks and Balances
A widespread mistake people in small business accounting make letting someone other than the business owner handle the business’s financial affairs. In that case, your business is more likely to generate fraud. In addition, inadequate or improper checks in balances can be big trouble for your business. Therefore, it is essential for a small business owner to handle the business funds and implement checks in balances as much as possible.
Another significant way to avoid fraud is by ensuring that the bookkeeping in the business is done by the person who is not the same person who makes deposits for the business. It must be the duty of the business owner to review the business’s bank statement every month.
Changing a closed period
An important issue is when you change the information of the period for which the tax return has already been filed. Such a mistake for a small business can lead to financial debt, causing you to make decisions based on inaccurate information about your accounts.
A closed accounting period is when all the period’s data has been correctly entered, and all the reports have been deemed correct. If you make any changes to the closed accounting period, you will be required to complete the closing process again, and if you have already filed the tax return of the close period, it will require you to file the text return again.
This mistake in a small business tax accounting can be easily avoided as many accounting software allows you to set a closing password on the books at the end of each accounting period. It is good to start using the system feature if you don’t use it yet, as it allows you to set an eight-digit password. You can select the date of that ending period as a password for you to remember it easily. If you still mistakenly attempt to change the information of a comparable period, you will get a pop-up warning to remind you to prevent it from changing.
Banks Reconciliation
With advanced technology, accounting software has been signed on Bank feeds that ensure streamlined data entry and matching account balance in your books to the balance shown by your Bank. And still, it is required to reconcile your bank and credit card statements based on every month.
Reconciling with your bank accounts helps you validate the information in your books preventing fraud. Adapting it in practice to reconcile your bank and credit card accounts at the end of every month will be a required step to ensure its correctness.
Falsely depending on automation.
The much implication in bookkeeping and accounting processes has made automation not infallible. For example, a common mistake that small business accountant make is by putting incorrect names of the payee on the transactions or posting transactions to the wrong account or such.
It happens when you over-rely on the automation services. It is necessary to remember that the augmented intelligence services take suggestions from the assumptions and data based on the history of the business. This means relying on it ultimately is not a smart move. To avoid this mistake, all you need to do is take the help of a workflow and predetermined processes. First, you must accept the transactions in the bank feed by ensuring the suggestions and transactions are correct. A great practice to avoid this mistake is practising data entry before using the bank feed to match the transaction to prevent the error.
Improper use of the accounting software
With the technology in advancement, there is powerful software to transform heavy work into a child’s play. Using software to make your work easy and efficient is very time-consuming and a reasonable requirement in today’s world, but using your software correctly is the deal.
Accountants and the bookkeepers of all times have a special bond of available entries. Available entries do everything from fixing accounting errors or correcting financial statements on their ends. However, to sustain in the world day, you must be aware of the technology and how to use it efficiently to manage the records of your business. Therefore, learning the proper use of software for accounting is crucial to enhance your accounting skills and complete the work in less time.
Read More: Types of Bookkeeping Services for Small Businesses
Funds on the books that are undeposited
The companies that use Bank feeds for data entry proposes are the most vulnerable to this error. It occurs when the payment has been posted into the bookkeeping software, but the deposit hasn’t been published. Again, a proper workflow is a solution for this error to be avoided.
Undeposited funds on the books can cause you to re-pay your taxes resulting in incorrect assumptions about the business’s growth.
Avoiding this mistake by correctly entering the deposits in your accounting processes results in proper management. In addition, verifying the deposited funds in your balance sheet at the end of every month can help you prevent this mistake.
Conclusion: By following these simple steps, you can help your small business accountants prevent general accounting errors and mistakes that can cause you more harm, even leading to significant debt resulting in more financial damage.
READ : Business
