Common book-keeping mistakes made by small businesses
Many small business owners are guilty of making mistakes when it comes to keeping on top of their books. In most cases, this means that they are neglecting to give their books their full attention because they are just far too busy with other aspects of running their business. However, this is not something that you can afford to do, as it can lead to financial errors and a lack of control over your business. With that being said, continue reading to discover some of the most common book-keeping mistakes so that you can avoid them.
- Believing profit and cash flow are equal – Many business owners make the mistake of viewing these as the same thing, but they are not. Your business could have a great cash flow but you could be struggling to make a profit. Equally, you could have a profitable company but a terrible cash flow. You shouldn’t assume that you have good profits just because your cash flow is healthy. You need to have a good grasp of the true financial picture regarding your business if the company is to grow and be profitable.
- Not controlling petty cash – It’s common to have ‘petty cash’ handy, i.e. cash that is used to purchase everything from snacks to small office supplies. However, don’t make the error of thinking you don’t need to record this expenditure. It can add up to significant sums over time, and, if you are frivolous and flippant with petty cash, you will probably be spending more than you realise.
- Failing to keep up to date with fundamental tasks – There are several bookkeeping tasks that simply cannot be ignored. This includes taking the time to ensure the books at your business are reconciled and match up with your bank statement. This should be done once a month. Not only does it help you to keep on top of everything that is coming in and going out, but it is helpful in terms of spotting any signs that are associated with fraud.
- Mixing personal and business finances – One of the biggest mistakes you can make is mixing personal and business finances. This is the quickest way to mess up the finances at your company. No matter how insignificant you believe a purchase is, or how many times you tell yourself you will move the money from one account to the other, you need to keep finances separate at all times.
- Not hiring an accountant – One of the biggest blunders business owners make is failing to hire an accountant. It is impossible to run all aspects of your business yourself, particularly an area where specialist knowledge is required, so you need to know when it is appropriate to seek outside assistance. This is definitely one of those areas where a professional can help; both by ensuring you comply with regulations but also by saving you money by ensuring all tax reliefs are claimed. Having a professional deal with your books will provide reassurance that everything is being handled efficiently and above board and you won’t make some of the common book-keeping mistakes. Moreover, if you look for a fixed fee accounting service, like the one we offer at Tuchbands, you can spread the cost and be confident of value for money.