In 2014 a survey of 500 small business owners was carried out, as to what they loved and hated most about owning their own business.
The results found that, unsurprisingly, flexibility and feeling in control came out on top in the “love” category. Meanwhile, close to 60% of owners found bookkeeping to be their most hated task.
Most business owners do understand that financial management is highly important for their business to grow and succeed. However, a lack of knowledge, frustration, and avoidance can ultimately add up to accounting mistakes.
By avoiding the following accounting errors, you can protect your business and reduce your stress.
Mixing personal and professional finances
From the start, business owners should have a bank account where they deposit their income and a seperate account to pay their expenses with.
A business only credit should also be set up. When tax time comes, seperate statements will make submitting claims simple and easy, as well as reduce the risk of an audit.
Letting accounts receivable slide
It is very easy to lose track of which customers have paid you and which are late. Strict policies should be put in place, as well as a schedule to track accounts receivable and pursue any outstanding invoices. Other strategies to minimise this could include:
- ask customers to pay upfront a the time of purchase or no more than 30 days later;
- contact clients to confirm they have received your invoice and to agree on a payment date;
- when payment dates are missed follow up immediately; and
- keep accurate, up-to-date records of every client’s payment history.
Accounts Recievable can become a breeze by investing in a cloud based accounting software, as this will automate your monthly invoicing – and contact late payers with a reminder email.
Not using tech to track your expenses
Tired of chasing down missing receipts and struggling to justify claims come tax time? There’s an app for that! Choose from numerous options, such as Receipt Bank, Shoeboxed or Expensify.
Many of these apps generate expense reports that are easy to share, or sync automatically with accounting software.
Neglecting to strategize for long-term growth
Effective accounting means managing day-to-day finances while making provisions for future growth. Software and cloud-based solutions offer easy ways to track your financials, but they also generate reports and provide analytic tools SMB owners can use for future forecasting.
Familiarize yourself with the reports your software can generate to track long-term trends, identify and mitigate risk, and discover new ways to increase profitability. Talk to your accountant about which reports and metrics are most important for your particular business and how to utilize them.
Final tip: Don’t go it alone
Small business owners are very rarely trained accountants. Therefore you shouldn't try to manage your company’s finances on your own.
Instead you should collaborate with a trusted professional, invest in quality IT software, and spend some time getting to know the relevant tools and trends.
You’ll feel empowered, which is step one towards forging a more love-filled relationship with bookkeeping!