5 Common Accounting Mistakes Small Businesses Should Avoid

In small business, resources are scarce. Minimizing the time you spend on accounting and financial management can save time and money in the long run. Small business owners can often overlook little things that can make a huge impact on their company. One area is managing the business’ finances. If done correctly, it can give you the financial flexibility you need, done wrong and it can be a drain on the business operationally. Here are five common accounting mistakes to avoid.

1. Doing everything yourself

As a small business owner, I know how tempting it is to try to do everything myself. While we feel it is admirable, this can cause problems. Not only do we have less time to devote to critical areas, we might also be prone to making mistakes as we find ourselves pulled in too many directions once the business starts to grow. An expert accountant can take a great responsibility off your busy shoulders and allow you to focus on the areas that need you the most.

2. Going for the cheapest solution

We can easily be lured into trying to save money in the short term or opting for low-cost solutions. Investing in the right accountant and technology now will save you valuable time and money in the long run. Cost associated with replacements or accounting errors will be eliminated.

3. Not maintaining records and receipts

Record all transactions, no matter how small or insignificant. This includes cash transactions at your storefront and the receipts from your client dinner. Keeping a record will help you catch any accounting mistakes, capitalize on tax deduction opportunities and be beneficial if an audit takes place.

4. Mixing business and personal finances

Using the same accounts for business and personal transactions should be avoided as the hassle of differentiating them can quickly get out of hand and before you know it, you’ll have lost track of whether the money going in and out of your account is for personal use or for your business. You might also classifying your transactions incorrectly and creating gaps in your business accounts, which will not only put your business at risk, but this can lead to problems when filing your taxes later on.

5. Not keeping a backup

This seems obvious, yet some businesses still fail to back up their financial records. Backing up your records not only insulates your business from issues like computer crashes, loss of equipment, accidents and natural disasters, but you will also be able to use and analyze your data for years to come. Using internet-based accounting software like QuickBooks will automatically backup and store all your data securely online and gives you access to your accounts in real time, anytime and anywhere.