Even if you’re not a numbers person, it’s important to have a basic understanding of accounting in order to make sound financial decisions for your business.
Here are 16 common mistakes business owners make when it comes to their accounting: Aron Govil
1. Not keeping track of expenses
If you don’t track your expenses, it will be difficult to determine whether or not your business is making a profit. Keep a record of everything you spend money on, no matter how small. This includes purchases made with cash, check, or credit card.
2. Not reconciling bank statements
One of the most basic steps in bookkeeping is reconciling your bank statements. This means comparing the transactions listed on your statement with those recorded in your accounting software. This ensures that all of your transactions have been accounted for and helps identify any potential errors.
3. Not paying attention to inventory
If you’re not keeping track of your inventory, you could be losing money. Make sure you track the number of units you have on hand, as well as how much each unit is worth. This will help you make sound decisions about when to order more stock and when to sell items at a discount.
4. Not tracking sales taxes
Sales taxes can add up quickly, so it’s important to track them accurately. Make sure you know what rate applies to your business and keep a record of the sales tax collected for each sale.
5. Not filing taxes on time
One of the most common mistakes business owners make is not filing their taxes on time. Filing taxes late can incur penalties and interest charges, so it’s important to file them as soon as possible.
6. Not paying estimated taxes
If you’re not making quarterly tax payments, you could be in for a surprise when it comes time to file your annual return. Estimate how much tax you’ll owe for the year and make quarterly payments to avoid any penalties.
7. Not tracking employee hours
If you’re not tracking employee hours, you won’t know how much money to withhold from their paychecks for taxes. Make sure you keep track of the number of hours each employee works, as well as their hourly rate. This will help you stay compliant with wage and hour laws.
8. Not tracking customer payments
If you’re not tracking customer payments, you won’t know how much money you’re owed. Make sure you keep track of the date, amount, and method of payment for each sale. This will help you stay on top of your accounts receivable.
9. Not budgeting for expenses
It’s important to have a plan for how you’ll pay for your business expenses. Without a budget, you could find yourself in a financial bind when it comes time to pay for things like rent, utilities, and inventory.
10. Not taking advantage of tax deductions
There are many tax deductions available to business owners. Make sure you take advantage of as many as possible to reduce your tax bill. Some common deductions include the cost of equipment, vehicle expenses, and advertising costs.
11. Not keeping track of employee reimbursements
If you’re not keeping track of employee reimbursements, you could be losing money. Make sure you keep track of the date, amount, and method of payment for each reimbursement. This will help you stay on top of your accounts payable.
12. Not using accounting software
Accounting software can make bookkeeping much easier. There are many different programs available, so find one that works best for your business. The program will automate many of the tasks involved in bookkeeping, such as recording transactions and reconciling bank statements.
13. Not reviewing financial reports regularly
It’s important to review your financial reports regularly to ensure that your business is on track financially. The reports will give you a snapshot of your business’s financial health and will help you identify areas where you could improve.
14. Not having a written business plan
A written business plan is essential for any business. It will help you define your goals and strategies, and will serve as a roadmap for your business. Without a business plan, it will be difficult to make sound decisions about the future of your company.
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Business plan
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Conclusion by Aron Govil:
Making mistakes is inevitable when you’re running a business, but learning from them is a key to success. Avoiding these common mistakes will help you keep your finances in order and your business on track.