There is no margin for error when it comes to accounting. Accounting mistakes not only hinder the growth of your business venture but misrepresent the financial position of the business as well. When it comes to bookkeeping, most small business owners complain that it is their worst nightmare when they cannot seem to get their numbers right.
Take a look at the 4 major accounting mistakes identified by accounting experts:
Not Keeping Track Of the Receivables
The number one mistake that most business owners make when bookkeeping is not keeping track of the receivables. When an invoice is issued to the customer, it signifies that the customer owes you money in exchange for the product purchased or services rendered. The easiest way to not lose sight of the receivables and prevent suffering a loss in business is to record the receivables entry as soon as you issue the invoice to the customer in anticipation of the payment of the outstanding balance.
Not keeping track of the receivable usually results in increased bad debts and a significant rise in the tax burden that eventually impacts the financial position of the small business negatively.
Not Saving Expense Receipts
According to many accounting experts, a series of tax, cash flow and accounting problems arise when small business owners fail to save copies of the business expenses they have incurred during the financial year. This may sound like a daunting task but collecting all expense receipts can help you in keeping track of the changes in your bank statement.
The easiest way to avoid this accounting blooper is to use your business card to make payments for business expenses only and instead of tossing the receipts into the bin or dumping them in your purse or pockets, collect them all in a folder or an envelope for later use during the tax season.
Avoiding Documentation of Cash Expenses
Perhaps one of the biggest mistakes that most small business owners make when bookkeeping is avoiding documentation of cash expenses. It is absolutely necessary for all entrepreneurs to record all expenses especially cash expenses in the bookkeeping journal. Recording cash expenses is critical because payments made in cash are also deducted from the total income when you file for tax returns; thus decreasing the overall tax burden and increasing profitability of the business.
Not Consulting a Tax Accountant during Tax Season
Trying to save costs by filing for taxes on your own may do more harm than good. Not hiring a professional tax accountant to handle your taxes may become counterproductive and you might have to pay higher taxes than you normally would if you would have sought professional advice from a tax accountant before filing for tax returns.
Tax accountants are well versed in tax accounting laws and so they can help in decreasing the tax burden by applying the right accounting tactics in accordance with the newly updated tax laws.
If you are not good with numbers, you can now hire professional CPAs, CFOs and tax accountants to help you with bookkeeping and file tax returns. Small business owners can avoid IRS penalties and heavy tax burden by contacting SK Financial CPA to hire CPAs, CFOs and tax accountants on a weekly, monthly or yearly basis at reasonable rates.