Here are four accounting mistakes you should avoid making.
Not staying on top of receivables
A receivable is recorded when you issue an invoice – it means that a customer owes you money. If you check your list of receivables, you will see your customer’s outstanding balance. When you receive payment, it should be matched against the receivable and then be marked as paid. This is, however, easier said than done.
Manual updating can be a chore, especially at tax time. If you want to skip out on the manual side of things, you should perhaps consider a combination of accepting online payments and cloud accounting software. This will automate the process, enabling you to get paid quicker and it will give you more time to focus on other things.
Not keeping expense receipts
If you do not keep your expense receipts, it can result in cash flow, accounting and tax problems – all of which you would like to avoid. If you’ve ever looked at your bank statement and can’t quite remember what that £75 charge was for, you can relate. Not having the correct receipt can result in incorrect tax expenses and also a higher tax bill if you get audited.
Although it’s very cumbersome, to avoid this you simply have to keep a receipt of every transaction on your business accounts. Try to keep an envelope on your person or in your bag at all times to store these. It can really help.
Not hiring a professional to help with taxes
SMEs tend to try and cut costs by handling their own taxes. Yet if not done correctly, it can cost a lot of money further down the line. You may underpay your tax bill or not claim the deductions you qualify for – either way, it will cost you money.
Spending money on a professional to handle your taxes will give you peace of mind that you know they are being handled correctly. A professional can prepare you for any new tax laws and apply the correct tactics to any other financial situation.
Not getting along with your accountant
If you’re getting bamboozled by the latest accounting jargon, say so. Many small business owners are too shy or embarrassed to tell their accountants that they have no idea what they are going on about.
Just remember that you are not a financial professional, you are a small business owner. You don’t have to be up-to-date with the latest jargon. Understanding this is what you pay your accountant for, and they should relay the information in layman’s terms.
If you and your accountant are on the same terms, then you are off to a winning start.