As a company owner, it’s important to be involved in all aspects of your operation. You needn’t be an expert in each area, but you do need more than a cursory knowledge. Business owners wear many hats throughout the day, but none is as alien and troublesome as the accounting hat.
Mistakes in most areas of the business are remedied with a little time and thought, but accounting errors can stunt growth, lose money, clog cash-flow, attract the attention of the authorities or damage your reputation with customers, staff or suppliers.
Here are 10 accounting mistakes that people regularly make. Stay clear of these and you’ll have made inroads into running a successful business.
1st Accounting Mistake Business Owners Make
Falling Behind in Entries and Reconciliation
We all let things get away from us, but some are more likely than others to come back and bite you in the behind! If you let significant spells go by without keeping on top of your statements, accounts, receivables and the like, then any and all financial statements are incorrect. Without current information, it’s tough to make sound business decisions.
2nd Accounting Mistake Business Owners Make
Struggling to be Software Savvy
If you are using accounting software to reduce the workload on accountants or bookkeepers, then you must ensure you take the time to learn how to use fully your chosen software. Not knowing what your accounting software can do means you could be missing out on information that could help you operate your business more efficiently. You could also end up entering incorrect or incomplete information resulting in your business decisions based on bad intel.
3rd Accounting Mistake Business Owners Make
Not Checking Reports
Accounting no mere tool for logging financial data to comply with national legislation and to tell you how much money you have currently. Accounting is a hugely powerful mechanism for providing answers to how a business’ decisions are working or not. Useful reports are made from your financial data, accounts payable, debtors, company profitability and more.
4th Accounting Mistake Business Owners Make
Mix Business and Personal Finances
You’d think this would be straight forward but you’d be amazed at how many businesses fall could of this issue. It’s obviously far better to maintain separate business and personal accounts, both for financial clarity and to help you mentally and physically think of your business and personal finances as distinctly separate entities, this will help you grow the business and provide you with a regular income.
5th Accounting Mistake Business Owners Make
The gold rule here is to keep everything. A good accountant will advise you as to which expenses can be claimed and you can always throw out receipts that can’t be. It’s far easier than trying to produce them from thin air when you discover they can be claimed back.
Should you receive a visit from HMRC then having copies of everything they could ever what to see is advisable and can help prevent penalties and fines.
6th Accounting Mistake Business Owners Make
Basic Mathematical Errors
These errors are easily made and easily overlooked. Double check everything or be prepared to pay the price at a later date in fines and penalties.
7th Accounting Mistake Business Owners Make
Focusing on the Short-Term
This is the old adage about how business owners should work ‘on the business’ not ‘in the business’ and is plain common sense. You employ staff to deal with the day to day issues of the company, so to find yourself operating in the same aspect of the firm is unlikely to be fruitful. You are best off driving your organisation forward and taking management level decisions rather than employing yourself on the shop floor.
8th Accounting Mistake Business Owners Make
Hiring the Wrong Person
This applies to any business, but accounting is such a complex issue that getting the wrong person in this position can have a harmful effect on your firm by hampering growth and limiting accurate forecasting abilities. Get a regular employee wrong and you may find yourself placating unhappy customers. Get an accounting employee wrong and you might find your business forced to close due to cash flow problems or other financial issues that crop up due to poor work from a poorly appointed accounts professional.
9th Accounting Mistake Business Owners Make
Thinking Technology is the Answer
There are all manner of online tools with all sorts of bells and whistles, but these systems are only useful if you know what you are doing in the first place. Remember, online tools are just that and are no use unless in the hands of a skilled operative. Technology can lead to huge leaps forward, but accounting professionals should still take these leaps. Stic to what you of best and let your accountant do the same.
10th Accounting Mistake Business Owners Make
10. Not Letting Go
Yes, it’s your business. You don’t, however, need to be involved intimately at every stage of its operation… set it up correctly and then let it run. There will be plenty of work for you to do without getting involved in everyone else’s job. The financial side of a company can make or break a business so force yourself to stay a step back from the day-to-day operations and focus on maintaining a macro rather than micro approach to your business.