Small accounting mistakes can cost your business big time,
limiting growth and causing serious setbacks. Here are 5 common accounting
mistakes that you can avoid by simply being in the know.
1. Counting Profits As Cash Flow
In order to operate a business you have to make investments and
purchase product, supplies, etc., but beware you are not buying product faster
than profits can catch up. Otherwise, you could find yourself in a lot of debt.
It’s important to know how much money you are bringing in
vs. how much money you are spending on product development. If you are making
money on paper but constantly have no money left over at the end of each month
it might come down to miscalculations in expenses vs. earnings.
The Solution:
Hire our certified CPAs to keep track of profits, expenses
and losses, providing you with a clear picture of where your business stands at
all times. It’s also important to carefully look over financial plans before embarking
on an expansion to ensure your business will make back its investment within a
reasonable time.
2. Throwing Away Receipts
We live in a digital world but paper trails still hold power
when it comes to deducting expenses or making up for any mistakes or gaps in
accounting records. All purchase records for small and big purchases should be
saved and accounted for. If you ever need to prove purchases to the IRS it’s
going to be hard to do so if you don’t have any record of it. Without the receipts to prove certain
transactions the IRS will consider it an invalid dedication, charging you back
tax and penalties.
Even if you don’t pay with cash you should still keep all
receipts. Just because you use a card or check doesn’t mean you will have any
record of what that charge was for.
The Solution:
Instead of hoarding piles of paper receipts for the rest of
forever, there are online programs that will digitize receipts and save a copy
so that you reduce clutter and increase ease of finding what you want. Let us
help you keep track of all valid expenses in order to earn the tax credits that
you deserve without hassle.
3. Mixing Up Business & Personal Expenses
Using business accounts to pay for non-business related
expenses complicates things and raises red flags with the IRS. It never looks
good if you are using company money to fund your personal life just as much, if
not more, than you are investing back into the company. Not to mention, it
complicates the numbers making it difficult to determine if you are breaking
even, losing money or in the green.
The Solution:
Keep separate credit cards and bank accounts for business
and personal use. This makes it much
easier to keep track of all profits, expenses and losses for your business. It
will also simplify things when it comes to doing your taxes.
4. Not
Checking Invoices & Vendor Statements
Is someone in charge of checking over invoices and vendor
statements to ensure everything matches up? One of the biggest ways employees
steal from employers is by making up phony invoices that appear legit, but only
at surface level. All that it takes is a little digging to ensure all invoices
add up to the real deal.
The Solution:
Keep careful tabs on all charges that go through the
company. There are software programs available that make it more difficult for
employees to create new vendors or get away with creating phony invoices.
5. Not Staying
On Top Of Receivables
Playing bill collector is never a fun gig but it’s necessary
in order to stay on top of company finances and keep your business financially
thriving. Oftentimes businesses bill out invoices and then don’t keep track of
when they are paid, and sometimes even if they are paid.
With so many invoices going out all of the time, it’s hard
to keep track of what’s what. Unless
someone is assigned to the task it’s easy for invoices to become long overdue
or underpaid. Accounting software can help automatically keep track of what is
paid and when. Many of these same programs will send out reminders for late
payments and offer clients a platform to pay online.
(Related Topic: 5 Small Business Accounting Mistakes)
We Help You Avoid
These Mistakes And Many More
DGK takes pride in helping small businesses keep track of finances to avoid IRS penalties, fraud, and other common issues that often arise from accounting mistakes. At the same time we can help your company find more opportunities for growth by creating concise reports packed with valuable insight.
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