Accounting is one of the most critical cogs of business, yet many business owners view it as a chore and not an opportunity. Consequently, they either put off or absolutely hate it, to varying degrees of negative consequences. You need to stay on top of your accounting whether you have someone in-house to do it or you outsource it.
Minimise any possible errors in your finances by hiring a professional accountant and bookkeeper. It may seem costly at a glance, but you’re not going to save money if you try doing it yourself or get help from someone who’s not qualified for the job. Prevent costly mistakes when you’re starting out or growing your small business. Here are the most common accounting mistakes you should avoid.
Mistake #1: Not Tracking Business Transactions
Record every transaction. Have digitised copies and paper backups for future references and to maintain the health of your business. Some of this may include records of employee compensation, cheque books, utility expense, cash receipts, and more.
For instance, a tax audit requires you to show records of all your business expenses, even the small ones. Hire a financial professional and look for accounting tools that can help you automatically monitor your business transactions and create a backup in case of an emergency. If you don’t watch your transactions, it may affect how you operate your business in the next few months, as well as offering an opportunity for tax obligations to come back to bite you in years to come.
Mistake #2: Poor Communication
Your bookkeeper needs to know what’s going on with your business, whether that’s small or big transactions, new finance or new accounts and company structures. Ensure that you and your bookkeeper clearly understand and communicate regarding your records, filing reports, and any other vital statements related to your finances. This gives both of you a good picture of your company’s overall performance at any particular time.
Mistake #3: Lagging Behind on the Paperwork
Owning a business is a lot of responsibility, but don’t put off your books up to the last minute. Falling behind on billing customers may result in a debt that may never get paid back. Late payments are a massive issue in Australia, so the last thing you want to do is delay collections from your end.
There’s also the risk of reports not being filed on time and other bill payments, such as your taxes, that can make you liable for fines and penalties from the ATO. No business owner wants a bounced cheque, penalties, or increasing debts, especially when it could be prevented early on.
Mistake #4: Not Providing a Clear Budget for Every Project
If you’re planning to start a project for your business, make sure that there’s a clear budget decided upon first. You don’t want to fund a particular project and utilise a significant portion of your cash flow for it without getting a good return on investment. Being in business for a long time will also allow you to gauge the budget in your following projects without costing you more than what you’ve intended to allocate.
Mistake #5: Mixing Personal and Business Accounts
Don’t have your own business account yet? Open one. This is another headache you should avoid. When you mix your business and personal account, it will be harder for you to track the business expenses, and you may even miss an expense that could be listed as a tax deduction. Your business accounts give lenders an understanding of your finances when you’re applying for a loan or financing solutions – not to mention your credit score. Maximising your credit score is key to obtaining the best financing solutions, such as invoice finance.
Mistake #6: Being Unwilling to Delegate Duties
Small business owners are often not willing to outsource essential tasks. While that’s understandable, it’s probably holding you back. Eventually, you will need to outsource (or hire) sufficiently in order to scale your business to expand. It’s far better you focus on your core competencies while paying specialists to handle necessities, such as your accounting. You need expert advice and experienced accountants on your team to maximise your income as well as your financial and strategic opportunities while minimising your taxes.
TIM Finance helps small and medium businesses sustainably access the working capital they need to support their operations, pay their bills and expand. Turn your unpaid invoices into the cash you need by making TIM Finance your partner for flexible business finance today.