1. Not taking bookkeeping seriously enough
The key to efficient accounting is to keep track of everything. Everything from tiny transactions to major payments from customers and clients should be recorded and correctly categorised in your accounts.Taking accounting seriously, no matter how tiny your company is, offers you an accurate, dependable picture of its health, allowing you to evaluate just how well (or poorly) you’ve done over time. Establishing a proper bookkeeping and accounting system for your business is the key to keeping it financially safe, from appropriately classifying different sorts of assets and liabilities to completing a regular review of your books and accounts.
2. Managing all of your accounting in-house
Do you do all of your accounting and bookkeeping in-house? It might be tempting to cut costs by managing your accounting on your own when you run a small business with minimal income. While doing your own accounting may appear to be a cost-effective method to save money, it may actually be losing your company money. An accountant will cost more than managing your finances on your own, but you will save money. Managing all of your accounting in-house causes you to lose out on opportunities to save money, from tax deductions you weren’t aware of to errors that are tough to see in your own company but easy for an expert to spot.
3. Failing to reconcile books with bank accounts
It’s critical that your company reconciles its finances on a regular basis. Reconciling is the act of verifying that an account balance recorded on your records is accurate and correct, and that it corresponds to your bank account’s true balance. Small charges and expenses that you may not notice at the time may go unreported from time to time. You can correctly track your financial status by reconciling your accounts—from your business’s bank cash to its payable accounts. Small companies should reconcile their books at least once a month to ensure that all of their transactions are correctly documented and that their books do not go out of sync with their actual account status.
4. Forgetting to record small transactions
How do you handle minor transactions in your company? It’s tempting to dismiss petty cash transactions as trivial, but it’s critical that your company keeps track of all of its expenditures, no matter how minor.This is particularly significant in retail settings, where many transactions are conducted with cash. Small transactions, such as paying for a mail delivery, should also be recorded, even if the amount is minor.Keep track of the minor transactions, and the bigger ones will be much easier to manage. You’ll be able to simply maintain your books when your firm develops in size and the number of transactions increases if you keep track of minor transactions.
5. Not assigning clear budgets to each project
Is it common for your firm to begin initiatives without first allocating a budget to each one? Going into a project with no concept of how much it may cost your organization is a certain method to spend considerably more than you anticipated.
Failure to budget correctly also makes it harder to control a project that has clearly cost your organization more than it should. This might lead to your firm squandering its limited resources on ventures that don’t pay off. As your company grows, you’ll have a better understanding of how much money it requires to stay in business. This makes it simple to create project budgets that are high enough to ensure success while not being extravagant or wasteful.