Common Accounting Problems Your Small Business Faces
Posted by: Brookside Admin
Accounting mistakes for small businesses can range from small inconveniences to large losses of revenue and time. The most severe accounting errors could even put you on the wrong side of the law. One option is to enlist the experienced CPAs at Brown Kinion and Company to handle your business's accounting needs. Whether or not you're handling your accounting yourself, it's important to understand some of the common pitfalls. Lindsay Lapchuck at the FreshBooks blog talked to a variety of CPAs to find out some of these common small business accounting mistakes. Here are the most valuable takeaways.
Every business owner knows that the invoice and receivables process can get complicated and stressful in a hurry. For accounting purposes, issues often stem from a disconnect or delay between receiving payment and marking an invoice as paid, or updating your receivables list. Over time, that list gets more outdated and becomes a tangled mess by tax time when you need to review it. That results in hours of time wasted trying to sort it out and potentially overpaying on your taxes. Of course, there's the added burden of allowing invoices to go unpaid for months.
It's difficult to devise a useful system for keeping track of receipts. Failing to do so, however, could cost you on your taxes and cause there to be money missing from your business that's unaccounted for. In the case of an audit, having receipts to document your spending and deductions is vital. To make it easier, you can start by only using your business credit or debit card for business expenses. That simplifies things immediately. Then, decide on a place to put every receipt you get when you get them and periodically go through those receipts and save them digitally or put them into your tax folder. In this case, organization will save you from a big headache.
- Cash Expenses
When you pay for an item with a card or check, there's a documented record for that transaction even without an actual receipt. What happens, however, if you pay in cash and don't get a receipt. This happens all the time with smaller purchases and those can add up to be hundreds or even thousands of dollars by year's end. That leads to discrepancies in your books and often leads to you overstating your income. Unfortunately, there is no sure-fire way to fix this problem. You simply have to be mindful that paying in cash requires additional action on your part to ensure that money is properly recorded.
- Hire A Pro
The budget for a small business is usually stretched thin and saving money by handling your own accounting can be tempting. In the long run, however, this actually costs you money. There may be mistakes on your taxes leading to fees or you missing out on deductions you earned, or you may just be dedicating so much time to keeping your books in order that the rest of your business suffers. Hiring a professional accountant allows you more time to spend elsewhere while gaining the peace of mind that comes with allowing an expert to handle your books correctly. Also, when it comes to accounting, it's always better to have an extra set of eyes to go over the numbers and find anything you might have missed.
Brown Kinion and Company offers a variety of services to small businesses to keep their accounting department running smoothly. Give our Broken Arrow office or Tulsa / Bixby office a call for help.