{"id":3116,"date":"2013-10-27T11:05:00","date_gmt":"2013-10-27T15:05:00","guid":{"rendered":"https:\/\/www.wework.com\/creator\/?p=3116"},"modified":"2020-03-30T19:10:09","modified_gmt":"2020-03-30T23:10:09","slug":"accounting-mistakes-put-small-business-risk","status":"publish","type":"post","link":"https:\/\/www.wework.com\/ideas\/professional-development\/accounting-mistakes-put-small-business-risk","title":{"rendered":"Accounting mistakes that put your small business at risk"},"content":{"rendered":"

Accounting mistakes can impede the growth of your small business and put it on shaky ground. Unfortunately, mistakes are all too common, especially for new or young businesses.<\/p>\n

In this roundup, five accounting experts from the FreshBooks Accountant Network<\/a> share the most common accounting mistakes they see from small business owners. They also provide insight on how to avoid making these bad-for-business bloopers yourself.<\/p>\n

\"\"<\/p>\n

Mistake #1: Not staying on top of receivables<\/h3>\n

\u201cGetting paid is always an exciting part of running a business. What isn\u2019t as exciting however, is keeping track of your receivables.<\/p>\n

\u201cWhen you issue an invoice, a receivable is recorded\u2014meaning that a customer owes you money. Checking your receivable listing you\u2019ll see that customer\u2019s balance as outstanding. As soon as you receive payment from that customer, it should be applied against the invoice to mark it as paid. In practice however, this is easier said than done, and customer deposits are often left to reconcile later on since there\u2019s never enough time in a day.<\/p>\n

\u201cAt tax time you\u2019re left with a bunch of customer deposits sitting in your revenue account and a receivables report that doesn\u2019t make sense. The consequences? Hours wasted updating the receivables listing, overpaying on your taxes, and high bad debts. Making it a point to follow-up on your receivables\u2014and apply payments to invoices on a monthly basis\u2014can save you tons of resources in the long run.<\/p>\n

\u201cWant to skip out on the manual updating of invoices as paid? Consider using a combination of cloud accounting software and accepting online payments, since this process will automate your receivables process, helping you get paid faster and sleep easy at night.\u201d<\/p>\n

\"\"<\/p>\n

Mistake #2: Not keeping expense receipts<\/h3>\n

\u201cMany business owners fail to save copies of business expense receipts, which can result in a series of tax, accounting, and cash flow problems. How many times have you looked at your bank account statement and had no clue what that $100 charge is? Is it supplies, a business meal, equipment\u2014or is it a personal expense you accidentally paid for using your business card? Not having an actual receipt that can give you details about the charge can result in incorrectly reported tax expenses and a high tax bill if you\u2019re ever audited.<\/p>\n

\u201cHow can you correct your receipts problem? Save a receipt of every business purchase. That process may seem very cumbersome, so here are a few tips to make it easier and less time-consuming: only use your business bank or credit card to pay for business expenses; have an envelope in your bag\/car where you can put all your receipts instead of putting them in your pocket, purse, or worse, trash can; once a week\/month go through the receipts stored in the envelope and file them to your tax folder or save digital copies in the cloud.<\/p>\n

\u201cOr better yet, add these expenses while you\u2019re on the go. FreshBooks has a very helpful feature I personally use that allows you to add your expenses and even attach digital copies of the receipt from anywhere you are\u2014your desktop or your mobile device.\u201d<\/p>\n

\"\"<\/a><\/p>\n

Mistake #3: Not recording cash expenses<\/h3>\n

\u201cIt is crucial for entrepreneurs to track all expenses related to running a small business so these costs can be subtracted from total income at tax time and to keep a better sense of overall profitability throughout the year. While credit cards, debit cards, and checks from your business\u2019s bank account are easily linked into FreshBooks, it\u2019s easy to overlook expenses paid in cash. Most commonly, some of these expenses are not recorded and thus forgotten\u2014causing the business owner to overstate income for the year! Be sure to develop a method for tracking these cash expenditures. Ask for a receipt from the vendor to enter into FreshBooks when you return to the office or log the expense immediately using the FreshBooks app on your smart phone.\u201d<\/p>\n

\"\"<\/a><\/p>\n

Mistake #4: Not hiring a professional to handle taxes<\/h3>\n

\u201cSmall business owners often try to save money by doing their own taxes. In reality, not hiring a professional can cost big bucks down the road. You may not claim all the deductions you qualify for, or you might underpay your tax bill\u2014leading to penalties and other fees.<\/p>\n

\u201cSpending the money to hire a professional means you\u2019ll have an expert who knows what they\u2019re doing, and can apply the right tactics for your financial situation. They can keep updated on the ever-changing tax laws and help you plan ahead for potential tax hikes.<\/p>\n

\u201cPaying for a professional bookkeeper can also help keep your costs of an accountant at a minimum, since they do all the prep work. Plus having another pair of eyes is never a bad thing, especially when it comes to finances and taxes. The success of your small business depends on the accuracy and organization of your financial paperwork.\u201d<\/p>\n

\"\"<\/a><\/h3>\n

Mistake #5: Not getting on the same wavelength as your accountant<\/h3>\n

\u201cSo, you\u2019re sitting there with your accountant, in a fancy office, listening to this:\u2028 \u2018EBITDA is strong, way up from last year.\u2019 You shift in your seat. You nod. \u2028It continues, \u2018Add in D & A, and your bottom line is still positive. And here\u2019s the kicker, thanks to loss carry forwards, tax liability is nil.\u2019<\/p>\n

\u201cIt\u2019s the bane of many small business owners. Not so much the part about meeting with professionals who love spouting jargon and buzzwords. No, that\u2019s not the problem. The issue, actually, is that most small business owners are too shy to tell their accountants that they might as well speak Romulan.<\/p>\n

\u201cYou\u2019re a small business owner. You\u2019re not a financial professional.\u2028 And nowhere does it say you have to be up-to-date on all the latest accounting blather. Besides, buzzwords, jargon and fancy strategies are why you pay your accountant. Translating all that techno-talk into language you understand should be part of the package.<\/p>\n

\u201cThink about it. \u2028Would you rather hear this? \u2018We used accelerated capital cost allowance to bring your tax liability to nil.\u2019 \u2028Or this? \u2018There\u2019s a temporary tax program that lets us completely write off all of the new computer equipment you buy. So if you need a new IT kit, buy it now cause we\u2019ll use that cost to get your tax bill down.\u2019<\/p>\n

\u201cBottom line is, if you and your accountant speak the same language then she\u2019s part of your team. She\u2019s watching your back, and she\u2019s providing advice you can bank on.\u201d<\/p>\n

Editor’s note: This story was written by Lindsay Lapchuk<\/a>\u00a0and originally appeared here<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Accounting mistakes can impede the growth of your small business and put it on shaky ground. Unfortunately, mistakes are all too common, especially for new or young businesses. In this roundup, five accounting experts from the FreshBooks Accountant Network share the most common accounting mistakes they see from small business owners. They also provide insight […]<\/p>\n","protected":false},"author":960,"featured_media":33790,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[43902],"tags":[],"class_list":["post-3116","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-professional-development"],"acf":[],"yoast_head":"\nAccounting mistakes that put your small business at risk<\/title>\n<meta name=\"description\" content=\"Accounting mistakes can impede the growth of your small business and put it on shaky ground. 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