Small business accounting: 5 common mistakes small businesses make
When starting out, many small businesses choose to take care of their own books. However, this can be the first of many mistakes, particularly if you have no experience in accounting. Here are some of the most common mistakes that you could fall victim to:
Mistake #1: Mathematical miscalculations
Armed with a calculator, you might think that nothing can go wrong when working out your earnings and outgoings. But it's all too easy to slip up and make mistakes, which can be difficult to spot if you're not used to working with numbers. Errors like this could cost your company in the long term, as you might not have the money to run certain operations, or tax time could hit you in a particularly bad way. It's always best to check figures several times or, even better, ask a professional to handle them for you.
Mistake #2: No backups
Too many small businesses forget to back up their financial records. Whether you're using professional software or not, it's important to have at least two copies of your books. This could be a paper and digital copy or linking your accounts to secure cloud storage. If you don't have any backups, you could quickly find yourself in hot water when your computer's hard drive fails and you have no information to give the taxman.
Mistake #3: Not setting a budget
It's essential to stick to a budget, not just so you know how much you can spend, but also to give you an idea of how your business is growing. Budgeting and forecasting can help you to plan your finances better and highlight areas where you need to cut costs or have room to spend a little extra.
Mistake #4: No separate business and personal accounts
When you use the same account for your personal finances as well as your business, things quickly become confusing. By keeping your finances separate, you'll always know what transactions were commercial and available to claim tax on, and which transactions were your own and unrelated to your business' budget.
Mistake #5: Trying to DIY on your bookkeeping
All of these common mistakes can be avoided by opting to choose a professional bookkeeping service. At Ascent Accountants we’ve been helping small businesses in Perth for many years now to stay organised and on top of their business’ tax, books and overall financials.
With our experience and technical knowledge we can help you better manage your business and free up your time so you can do what you do best and focus more on what you love doing.
And we’re guessing that’s not doing your own bookkeeping!
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