If you’re a solo-entrepreneur, freelancer, or small business owner it’s easy to think that accounting errors come from a lack of attention to detail. But often accounting issues start with day-to-day operations. Small mistakes can turn into costly issues for your small business.
Here are a few tips to help you avoid accounting issues
Keep your receipts
If you’ve ever worked with an accountant or an accounting firm, like the Intersource Consulting Group, you know that the first thing they usually tell you is to keep up with all of your receipts. In fact, they will often tell you to keep up with both your business and personal receipts – because small business owners often unintentionally make business purchases with personal funds. Whether you need to get an accordion folder to keep up with your receipts on a monthly basis or you use an app to scan all of your receipts in daily… it’s important that you keep up with your purchases.
Manage your receivables properly
Receivables is just the official name of all the money that is expected to your business from customers, clients, or sales. Basically, it’s all the money owed to you that you should receive in the near future. You might think that it’s trivial to track this as the money will come eventually.
But, we all know that if payment isn’t received upfront, reminders are often needed. You should always keep an eye on your receivables to make sure that invoices aren’t going unpaid. It’s also important for accuracy. For example, you may receive a payment that is less than the agreed upon amount. This is the type of discrepancy that causes cash flow problems.
We’ve already mentioned tracking your receipts and keeping up with your outstanding receivable, but are you also tracking your cash expenses? The ones you might not receive receipts for? It’s important that you do as these will affect your taxes as well. Unfortunately, though, many business owners lose track of their cash expenses as the records aren’t as easy to find as with card payments. So, before you do anything else, make sure that you come up with a process to track all your cash payments.
Sidenote: This is especially important for petty cash reporting or when you give cash to some of your employees to buy equipment or supplies. Always require a receipt for their purchase.
Not having an accountant or a detailed accounting process
Hiring an accountant to take care of your business’s accounts and taxes is something you should consider from day one. Find an accountant that understands your business goals and your current methods of tracking your revenue and expenses. You also want to look for someone that you can build a trusting relationship with. Someone that communicates with your frequently and makes sure that you understand exactly what’s happening with your financials at all times.
Tip: If you’re not in a place that you’re ready to hire an accountant, implement a detailed accounting process. Purchase software like QuickBooks or FreshBooks, to keep up with revenue, expenses, payroll, and your accounts payable/receivables.