Small Business Accounting Problems
Small business owners' life is full of challenges. There are so many things to do. Accounting is critical for every business. Still, it gets overlooked; the tasks get piled up or left undone. If it is the case with you, you must do something about it to avoid dealing with major small business accounting problems.
If you want to do your business' accounting right, you need to know many accounting principles and concepts. And if you take stock of the situation, you will find that most owners lack this knowledge or background. Here is a list of common accounting problems you should watch out for.
Commonly Seen Small Business Accounting Problems
Relying on Traditional Accounting
Don't rely on paper-pencil or spreadsheet accounting. Implement the latest accounting software to streamline your daily accounting tasks. The automation will take a lot of pressure off your shoulder as it generates reusable data. It reduces your manual efforts.
The solution is to list your accounting needs and research to find the accounting software to fulfil them. Check out those accounting systems specifically marketed to businesses in your industry or niche. Ensure that the system can,
- Manage contact
- Track contact history
- Prepare & send invoices
- Prepare financial statements
- Manage inventory
- Track sales
- Process payroll
- Prepare budget
- Prepare tax return
Irregular Accounting of Books
One can sympathise with you if you are irregular with your business' accounting. It is one of the commonly seen common business accounting problems. It happens to many, especially when you are focused on survival.
If you are habitually late in updating your finances, you are in trouble. And preferring amateur, weekend, or happy-go-lucky accountants over experts can lead to errors like,
- If you are spending money but are not updating your income statement, you will show a negative balance
- It may scare off investors as they first go through your records
- Missing receipts, bills, and invoices or inaccurate documents may cause more significant problems
The solution is to update your books daily, weekly or monthly. And prepare accurate financial reports and not a report presented in a PDF or spreadsheet.
Inaccurate Accounting Records
You have to deal with too many numbers to do your business accounting. It could lead to losing money, creditors, investors, or reputation. It could sink your business. These mistakes may happen because you are,
- Not using the latest accounting software
- Not following the proper financial reporting standards
- Making mistakes in data-entry
- Missing data
The solution is to use the latest online accounting software and update your financial transactions promptly. With these tools, you can access your data from anywhere and anytime. It enables you to limit your accounting problems.
Mistakes in Payroll Processing
Payroll is your business' liability that you must discharge at the end of each pay cycle. It is a straightforward task if you have automated using an account or payroll software. Manual payroll processing is highly error-prone.
The solution is to implement the right software that fulfils your business needs. If possible, let the experts handle it for you. It will reduce your workload and stress.
Separating Personal & Business Accounts
It would help if you kept your personal and business expenses separate, or it will confuse your accounting. After a week, you could not remember which were personal or business expenses.
Failing to separate personal and business expenses is one of the common small business accounting problems. It will only lead to inaccurate records, financial reports and taxation. It will break your creditors', shareholders', and investors' trust in you. It may also lead to penalties, fines, or imprisonment by the regulating agencies.
The solution is to open a corporate bank account for your business. Pay for all your business expenses using this account. They are recorded by the bank meticulously. You get to use the bank statement to compare and reconcile your accounts.
If you are irregular in updating your business' books, it means you are using inaccurate data to make your business decisions. It could hurt your prospects and can lead to loss of money, efforts, and, ultimately, business. You can master these small business accounting problems by hiring experts to update your books.