Accounting is an extremely important aspect of your business. It was an extremely important aspect of businesses 100 years ago, and it’s extremely important today. However, how accounting is done today is done very differently than how it was done a century ago.
That’s both a good thing and a bad thing. With today’s technology, it’s easier than ever to keep track of even the most minute detail, which is a good thing. But with so many details to keep track of, it’s extremely easy for things to fall through the cracks.
The consequences can be dire. A simple mistake, if allowed to go unnoticed and fester, can be the downfall of your business. It’s important to keep your eyes open for potential accounting errors so you can catch them early before they cause trouble for your company. With these tips, you may even be able to prevent them from happening at all.
Not Having a Way to Track Errors in Real Time
If you’re relying on someone to notice that there is a problem, you’re going to miss a lot of mistakes. If they are eventually discovered, it could take days, weeks, or even months, which can be devastating to your bottom line.
Make sure you know exactly when an error takes place by using error tracking tools. Many different kinds of accounting software contain tools that are specially designed to alert you to potential problems, but there are also other programs you can add to your accounting software to identify issues and notify a member of your team immediately.
Doing Your Accounting by Hand
If you have a very small operation, doing your bookkeeping by hand may not be a problem. However, as soon as you start adding customers and employees, you should put down your pencil.
Programs and applications almost always do a better job of keeping track of information accurately. It’s much easier for you to make a mistake when you have to write it down by hand.
In addition, programs can make accounting more efficient. It will take less time to do the same job, freeing up your time so you can focus on other things.
Not Using the Cloud
Using computer programs to keep track of your accounting information is a great first start, but where you store your information matters. It wasn’t that long ago that all of your important company information would be stored on computers and external hard drives.
That’s a lot like putting all of your eggs in one basket. If something goes wrong with your system or your equipment becomes damaged, you could lose everything.
Today, you have the option to use the cloud. It can provide your business with many benefits that include:
- It enables you to access accounting and bookkeeping information anywhere you have an internet connection.
- There’s no need to worry about underlying infrastructure costs, and you don’t have to worry about backing up or maintaining your systems.
- You always have access to the most innovative technology available.
- Cloud-based systems are extremely easy to scale as your business grows.
- With private storage options, you can keep all of your information secure.
Having Just One Person Responsible for All Accounting Tasks
You may be tempted to do all the accounting on your own when your business is small. Then, when it grows, you may be tempted to hire one person to keep track of all the details.
Making sure someone is in charge is important, but that doesn’t mean they should be the only person who understands the accounting program or uses it regularly. It’s a good idea to have at least two or three people who are capable of keeping track of the business’s finances.
That doesn’t mean you have to spend all your time looking at your spending accounts! It just means you know how to log in and access that information, and you do it regularly, according to your schedule.
Information has to be entered into the program correctly if you want it to be accurate. Unfortunately, mistakes happen, and some transactions can be miscoded.
For example, you might accidentally list fixed assets as expenses, or you may misclassify current liabilities.
It’s important to have a code for every piece of data that is entered into the system, and those codes should be scanned and the data they contain evaluated regularly.
Putting off Updating Finances
Procrastination is common in the office. With so many things to do, it’s easy to keep putting off the things that are at the bottom of your to-do list.
Although it may not seem urgent to enter expenses at the end of the day, it’s not a good idea to wait. It may not be urgent, but the longer you put it off, the more you’re going to have to do. It’s a lot easier to enter a few expenses at the end of the day than it is to wait and spend an entire afternoon trying to update your accounting information.
Mixing Business and Personal Spending
You know you aren’t supposed to mix business and personal spending, but it can be so convenient! It can save you money too. Sometimes, processing expenses through a personal account costs less than using a business account.
No matter how tempting, you should never mix business and personal spending. A few ways you’ll find yourself in trouble if you mix business and personal spending include:
- Should you be audited, it can be difficult to separate your business from a potential hobby.
- Declaring your income and expenses at tax time can be a nightmare if you have expenses listed in multiple places.
- It’s easy to miss deductions, and it can cost you more time and money to have a tax accountant dig through multiple accounts.
Don’t let an accounting error be the reason why your business goes under. Make sure you keep track of all your income and expenses accurately, and you’ll rest a lot easier at night knowing you can continue growing your business confidently.