Over many past years, I have helped hundreds of business owners grow and scale their businesses. I have had the privilege of helping business clients increase their revenue in a short period of time by teaching them how to create systems and controls and making smarter business choices. Unfortunately, for many business owners the process of scaling often comes with a steep learning curve when it comes to accounting. I have seen brilliant entrepreneurs have to take a step back (or sometimes two) to regroup after an accounting mistake. Most small business owners are doing at least one of the following most common accounting mistakes when it comes to small business bookkeeping. These include:
- Putting it off until the guilt drives you crazy. Procrastination comes from the fear of doing something incorrectly. As a small business owner, particularly one who is still learning their way around a balance sheet, the fear of messing up your books can be a very powerful one. So you put it off. Which can cause you to miss important tax deadlines and lead to confusion down the road as you try to reconcile records from several months prior.
- Mixing business and personal spending. Don’t do it. If you are unsure, ask your CPA. It is much easier to make a quick phone call today then have to adjust a year’s worth of books down the road.
- Not hiring a CPA. There is a reason that I take my car to the mechanic. They are the professionals and specialize in understanding the ins and outs of vehicle repairs. The same is true of your CPA. They are well versed in the current tax rules and regulations and will help ensure that you are running smoothly and avoiding the IRS pot holes.
- Not reading your financial statements. As a business owner, it is crucial that you educate yourself on the contents of your financial statements and make it a practice to review them often.
- Throwing away your receipts. No one wants to get audited, but when it does happen you will be happy that you saved all your receipts. Consider keeping them in an electronic format for easy retrieval in the future.
- Hiring an inexperienced bookkeeper. This tip is along the same lines as number three. Hiring an experienced bookkeeper that can set up your books properly and keep things organized is a valuable asset to your company’s financial pillar.
- Recording payments to yourself as an expense. New business owners make this mistake often, and it can cause a headache for both your bookkeeper and your CPA.
- Reporting transfers as income. An accurate financial statement can help you make informed decisions about your company and its financial health. If you make this particular mistake, your records may lead you to make decisions that are not in the best interest of your business.
- Neglecting sales tax. You have a to-do list a mile long, and this one task can often go neglected. Stay on top of things and talk with your CPA to make sure that you are compliant.
At the end of the day, the majority of these mistakes come down to guessing. When in doubt take the time to ask questions and educate yourself on the proper bookkeeping protocol to ensure that you have the most accurate books year-round.
Sign up for a free personalized mentoring session.
Copyright ©John Trenary 2021
One response to “Common Accounting Mistakes”
[…] If you liked this thought, you may also like Common Accounting Mistakes. […]