Many small business owners do their accounting to save costs and maintain control over their financial data. On the other hand, some entrepreneurs do it since they have a strong financial background that enables them to handle basic accounting tasks. Unfortunately, either of these can result in common accounting mistakes.
Let’s take a look.
Common Accounting Mistakes of Small Business Owners
Small business owners, due to limited resources, time constraints, or lack of accounting expertise, are prone to common accounting mistakes and pitfalls, such as:
1. Combining Business and Personal Finances.
Small business owners tend to mix their personal and business finances.
According to experts, commingling finances will complicate your taxes. Moreover, it becomes harder to get a clear picture of your overall financial health.
2. Inaccurate or Inconsistent Record-keeping.
As a small business owner, you’re more likely to wear multiple hats.
Understandably, it can be challenging to maintain meticulous and updated records of your income and expenses.
Left unaddressed, this can result in errors, missed deductions, or costly legal sanctions.
3. Incorrect Classification of Expenses.
Small business owners without an accounting background tend to misclassify expenses. These can result in inaccurate financial statements or tax issues.
4. Ignoring Cash Flow.
Cash flow is the movement of cash in and out of your business.
This determines your business’ capacity to settle bills, salaries, and supplier payments, among others.
Unfortunately, most small business owners focus solely on profit without considering their cash flow.
5. Failing to Set Aside Tax Payments.
Taxes are a business expense, however, many small business owners fail to realise this.
Hence, they neglect to factor them in when computing their payables. Thus, many businesses scramble and stress over penalties come tax season.
6. Not Seeking Professional Help.
Even if some business owners can do their accounting, this won’t be sustainable as your business grows.
This is where professionals come in.
For instance, a good number of AU business owners outsource accounting tasks to qualified Filipino accountants with the help of Remote Staff.
Benefits of Seeking Guidance from Professional Accountants
Small-and-medium (SME) business owners can reap many benefits from hiring professional accountants.
These include:
- Ensuring Accurate Financial Records. They keep your financial records accurate and compliant with relevant tax and legal requirements.
- Gaining Valuable Insights. When you outsource accounting tasks, you’re also gaining access to experts’ financial insights. Aside from recording transactions, an accountant also analyses financial data to extract valuable insights about your cash flow, profitability, and other key metrics.
- Optimising Tax Strategies. They can also help you maximise and save on taxes. They can identify tax deductions, develop tax-minimisation strategies, and keep you compliant with tax laws.
- Enhancing Credibility with Stakeholders. Having a professional prepare your financial statements enhances your credibility. This gives investors, lenders, and potential business partners more confidence in your business’ stability.
Ultimately, the decision of whether to keep or outsource your accounting depends on your needs and circumstances.
However, if you want to expand your reach and grow your business, you can never go wrong having professionals on board.
For the last 16 years and counting, Remote Staff has matched business owners like you with the right talent. Thus, if you plan on delegating your accounting, we’ve got you covered.
Call us today or request a call back so we can get started.
Syrine is studying law while working as a content writer. When she’s not writing or studying, she engages in tutoring, events planning, and social media browsing. In 2021, she published her book, Stellar Thoughts.
