No matter how small or big your business is, you need a reliable system guiding your accounting processes. That way you stay in control of your finances. Failure to put in place a foolproof system will be detrimental to your growth. That is on top of potentially putting you at odds with government-imposed compliance procedures.
There’s an alternative at your disposal. That is outsourcing your accounting needs to a finance company. Such a business strategy affords you an array of benefits. For starters, you can rest assured that professionals are doing the job on your behalf. Their sense of accountability is topnotch. Plus, you get to reduce your overhead expenses. Keep in mind that outsourcing is more cost-efficient than maintaining a full-time and in-house staff. For the latter, you will need to pay employee benefits and employment taxes, among other things.
But let’s not get ahead of ourselves. The first order of business is foolproofing whatever system you currently follow. To do that, avoid these common accounting mistakes.
Lack of regimented procedure
Your accounting system should have standardized checklists and forms. They should be accomplished with keen attention to detail. A regimented procedure makes the process more seamless. And should your current accountant resign, it’ll be easier to pass the system to their successor. Consider creating a fixed documentation process for new vendors, for example.
Non-experts doing the job
If you’re a small business with fewer than 10 employees, you’re probably doing accounting and bookkeeping yourself. Or you likely delegated the job to your admin staff. That’s okay if you or your admin personnel are equipped with the knowledge and expertise vital to the job. If that’s not the case, you’re bound to encounter problems. You must seek the help of a finance recruitment agency to have the right people do the job.
No outlined budget
This is most crucial if you have limited capital. You need every expense accounted for. And it should fall within your budget. If there’s no outlined budget to work with, it’s difficult to assess whether your spendings are within what your business is financially capable of. Plus, your financial goals will not be reasonable.
Inaccurate tracking of expenses
Ideally, you have an integrated system for tracking business transactions. This system consolidates all pertinent information on the movement of money, from bills paid to paychecks issued. Inaccurately tracked expenses complicate future financial plans.
Data entry errors
Sure, you have an integrated system in place to track financial transactions, but is data entry done with the utmost accuracy? Here you must demand whoever’s doing your bookkeeping to double or triple check if necessary all data entries. Otherwise, one mistake defeats the purpose of this integrated system. The resulting valuations will be impractical since they are laden with errors.
Mixing personal and business accounts
You can’t excuse yourself by saying you’re running a small business anyway and that’s okay for your personal accounts to mix with your business accounts. Those books must be separate. Otherwise, how are you supposed to track your business’s financial progress, separate from your other sources of income?
Zero software backup
Your accounting software should have a regular backup schedule. Set backup on auto mode. You cannot afford to lose data. That’s a mistake that will make you scratch your head and throw things at your computer.
Poor billing procedure
Your cash flow should be managed well. And that hinges on an excellent billing procedure. If you often run out of cash to pay for operating expenses, chances are you’re doing invoicing wrong.
Inaccurate book entries
The most basic book entries are assets and liabilities, income and expenses. Ideally, your bookkeeper understands those concepts. Otherwise, they might be putting financial entries on the wrong column of the ledger and that will be bad news for you come tax season.
Failure to prepare for tax season
Speaking of tax season, it pays to always prepare in advance. You cannot afford to procrastinate. The documents you submit to the taxman should be foolproof. Remember that you’re dealing with the law here. Anything that’s suspect might lead to avoidable legal glitches.
Keeping your business’s finances in order takes a special kind of expertise. It’s not something you can do on your own, especially if you lack the background in the ins and outs of the job. Or it’s not something you can haphazardly entrust to personnel that lack the essential competencies. You may want to explore available alternatives. For instance, outsourcing.
Nowadays, even the biggest brands outsource. That speaks of the strategy’s efficiency. If you want to test the waters, you may start with outsourcing your accounting needs.