Small businesses usually have (by definition) fewer resources than larger businesses, and this often means the manager takes on the role of bookkeeper and accountant. Whilst this may seem like a good money-saving scheme on the surface, there is a great potential for making mistakes. Here’s the tragic thing: most managers don’t know they are making the mistakes until they talk to a professional who can show them a better way of handling things.
One of the most difficult issues a small business can face is balancing the books and planning for taxes. Luckily, there are professionals who are willing to show you which errors to avoid. Here are the top accounting mistakes made by small businesses – and how to avoid them.
It’s often a hassle keeping the records straight, but even though bookkeeping might not be your favorite part of the business, it’s essential that it’s done regularly, without delay. Not only will regular sessions of bookkeeping and accounting give you the knowledge you need about the current state of your business, it will also ensure that you won’t run into trouble when it comes to the yearly financial statements you have to prepare.
When doing the bookkeeping, create a system that you can easily understand. The purpose of accounting is not just to record everything, but to be able to analyze all the data and learn valuable lessons from it. Categorise and classify.
If you don’t, you’re just following a system in which Garbage will go In, and Garbage will go Out. You don’t want a GIGO system.
Failure to simplify
Every business has its own model and system – often these systems can get complicated. Simplify, simplify, simplify.
Check regularly for inconsistencies; not knowing where irregular numbers come from or how certain expenses and income entries were formulated can wreak havoc.
Ignorance in tax planning
There are many laws and regulations when it comes to taxation, and knowing what is allowed and what is not allowed can accomplish two major things: first, it can save you a lot of trouble. Secondly, it can allow you to plan your taxes for the benefit of your business, as good accountants in Glasgow from Wylie & Bisset will confirm.
It should be said that most business managers don’t handle it the smart way not because they themselves are not smart, but simply because they haven’t been able to sit down with a professional who has given them some valuable hints.
That’s where the professional accountants come in, and their service is not just about numbers and calculators – it’s about giving invaluable advice, helping to plan the future, and saving lots of money. Knowing which mistakes to avoid is half the battle; knowing how to do it better ensures success.