Before discussing the main accounting errors made by small companies, you must first understand what bookkeeping is and why it is vital. Bookkeeping refers to the organization and preservation of your financial and accounting information. These details include diaries, tax records, ledgers, etc. Bookkeeping with accounting services in Pune is a critical success factor for a small company. The following arguments demonstrate the same:
- Effective financial assessment & management
- Minimal possibility of being audited by the IRS.
- Allows owners to monitor growth and profitability.
Therefore, it is time to examine the most common accounting errors committed by small company owners.
Bookkeeping mistakes made by small businesses:
- Trying to do everything on your own
The proverb “Jack of all crafts, master of none” is surely known to you. It’s noteworthy to notice that this proverb also applies to your working life.
Therefore, you should avoid making the error of doing your own accounting. Delegate this responsibility to a devoted expert who can capitalize on the accounting trends of 2021 and provide you with superior services when necessary.
- Failure to maintain a backup copy of the records
The evolution of cloud technology over the years has made the bookkeepers’ tasks pretty simple. No longer is it the usual to keep physical copies of crucial documents. Cloud hosting is a more secure and practical solution accessible today.
For this reason, you should build and maintain a physical or electronic backup of every record.
- Ignoring a Large Purchase as a One-Time Cost
If you spend big bucks on printer paper, a high-end fountain pen, or any other item that has to be refilled every few weeks or months, you’re asking for trouble. In this instance, it is advisable to record transactions beneath “office supplies” and discard them.
- Eliminating Receipts for Minor Purchases
Buying a few stationery items, paying a few dollars on a new water dispenser, and making a variety of other modest transactions are often not recorded. Numerous small company owners discard these receipts without a second thought.
However, you should be aware that these tiny expenses may add up to a substantial amount. In addition, the absence of a record to support this amount might complicate budgeting and cash flow analysis.
- Constantly Choosing the Cheapest Available Resource/Product/Service
It is your obligation as a small company owner to conserve money wherever feasible. However, this does not imply that quality should be compromised. Do not choose Accountant A just because their fees are lower than those of Accountant B. Conduct research, identify the necessary attributes and skill sets, and then choose the most cost-effective choice.
Similarly, you should use caution while purchasing services or supplies/materials. Although you don’t want to spend money, you should always prioritize quality in your decision-making.
- Misclassification of Human Resources
Misclassifying your employees might land you significant legal problems. Whether you use the services of employees, independent contractors, or freelancers, you must identify them accurately. This activity requires the assistance of a bookkeeper for small enterprises.
In this instance, a bookkeeper will explain the distinctions between 1099 and W-2 employees.
- Failing to have the Owner Examine the Books
Yes, a small company owner needs a competent accountant for bookkeeping. However, it is not desirable to allow full resource access to sensitive data without applying any controls.
There have been several cases of accountants/bookkeepers defrauding their clients.
Therefore, for the success of your business, you should constantly evaluate your books.
Yes, accounting consultancy services in Pune is one of, if not the most important aspect of a business’s success. However, many small company owners encounter financial difficulties because of preventable accounting errors.