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10 Money-Wasting Business Accounting Mistakes You Must Avoid
While companies always aim for higher sales and profits, there is sometimes a possibility of loss due to different reasons. As a good business owner, you might overlook a flaw in production or supply chain for once facing a small loss. But you definitely cannot afford to lose money due to poor decision-making, typically in the case of how you manage your finances and financial information.
The accounts management task is important and as the owner of your firm, you might want to manage it on your own. But ask yourself these questions. Are you a qualified accountant? Do you have knowledge and experience in accounts management, especially in a business setting? If you answered no and you are handling financial accounting yourself, you might be putting your business at risk of monetary loss due to multiple finance-related mistakes and bad decisions; let’s discuss some of them in detail.
Accounting Mistakes You Must Avoid to Prevent Wasting Money
1. Being a Jack of All Trades
As a business owner, you might be working day in and day out handling clients, vendor/supplier relations, managing inventory, supervising staff, increasing your industry network, and doing a lot more. But how often do you get time to review checking accounts?
If you usually run short on time to look into financial records and expertise to generate important statements, failing to perform analytical equations, you might make mistakes that would keep you away from knowing the actual financial performance of your firm.
Therefore, it is always advised to have a professional in place for finance and accounting processes. And, if it is difficult to find skilled resources locally, outsourcing can be a great option that you can also benefit from. Hence, outsource accounting services when in need of experienced and reliable accounting professionals.
2. Not Tracking Cash Flow Regularly
The flow of income and expenses is called cash flow. Unless you track your company’s income and costs, you would not be able to become aware of how much money is coming and how much is going out of your checking accounts. Not only that, you would not know how much money is left in reserve and if you have surpassed your budget on not.
Overlooking cash flow is a mistake you must avoid. Therefore, each expense, regardless of its size, must be recorded and tracked. Similarly, all the income transactions, even the smallest ones, must be entered into records accurately. This will further help you see the accurate picture of your business finances, helping you perform financial forecasts.
3. Not Following Up on Unpaid Invoices
One of the biggest mistakes business owners do is to notify a client about a pending payment and then forget about it. If you are not keeping an eye on delayed or unprocessed payments, you might not secure enough funds for the future.
In the recent few years, several studies have found that a lot of businesses get their payments late by clients, sometimes with a delay of more than 60 days. Don’t let this happen to your firm; always take a follow-up with concerned persons regarding pending payments because it impacts your cash flow and bottom line.
4. Spending More Time & Money on Rectifying Inaccurate Records
Even though you have a bookkeeper in place, you might not be sure of your records’ accuracy, payroll calculation, and other accounting operations. Moreover, when you find inconsistencies in financials, you might be hiring a CPA for reconciliations, payroll accounting, and support with taxes.
This means you are spending extra money and this is a huge mistake you can avoid by having a strategic approach to F&A. You may either establish a team of accountants in-house or simply hire a trusted outsourced accounting services firm that covers end-to-end business accounting procedures including tax preparation.
5. Making Financial Decisions Based on False Information
If your financial information is inaccurate that you might not be aware of, you may be at risk of making important financial decisions that would not bring good results. For example, your last quarter’s revenue shows excellent earnings but being unaware of some high costs that are mistakenly not included in the balance sheets; you might prepare a budget for the future you wouldn’t be able to comply with.
Not only that, but business taxes are also computed based on its financial transactions. If the numbers are incorrect, you will file incorrect taxes that can lead to an ISR audit and hefty fines. Therefore, avoid making such mistakes and focus on improving the accuracy of financial information.
6. Underestimating the Importance of Paperless Processes
Your company might be using a large amount of paper circulating across departments. However, know that a huge portion of this amount gets wasted due to incorrect or poor printing, wasting money.
If you go paperless and start managing documents, forms, invoices, and everything you use paper for in digital formats, you will save a considerable amount of money. In addition, you can edit digital documents, and even if you destroy them, they don’t cost you any penny; in fact, they create more space in your storage systems.
With technologies like cloud, e-signature, e-receipts, etc., you can bring a revolution in the way you use paper at your firm, not only saving money but also the environment by reducing your carbon footprint.
7. Not Upgrading Technology Systems
Businesses in today’s fast-paced world are competing by using advanced technology and software tools and if you want to become a strong competitor, you need to catch up with the ones ahead of you.
It means if you are not upgrading your legacy accounting software, you might be missing out on several opportunities to enhance accounting practices that can help you ensure compliance and save valuable capital. Avoid making this mistake by investing in smart, automation-powered software and tools.
8. Using Multiple Software
Business owners usually face trouble finding an all-in-one software that does everything for them, due to which they use separate programs to fill different gaps. But that’s problematic because, essentially, the financial statements flow from the accounting software. With multiple systems, important financial data can fall through the cracks.
Hence, it is advised to use comprehensive software that covers most of your requirements. This will improve the workflow and help you prevent wasting money by using multiple software for different purposes.
9. Not Utilizing Your Time Wisely
If you believe that managing the bookkeeping & accounting yourself will save you money, it is time to evaluate your core roles and responsibilities. As the aphorism states, ‘time is money,’ your time as the leader is the most precious in your company. You might want to spend your time in areas like sales, advertising, and growth plans. Spending time dealing with discrepancies and hiring/training non-revenue-generating staff divert attention away from your revenue-generating core capabilities.
It also means you’re probably overly involved in your company’s finance function’s simple and unproductive activities that can be managed by hiring a team of professional accountants in-house or easily and cost-effectively outsourced.
10. Not Seeking Professional Support
Doing accounting on your own or assigning the job to someone from your clerical staff can cost you a lot. If the accounting work remains incomplete or done wrong, you would end up losing more money than you would have thought of saving.
Therefore, start with evaluating your accounting needs and seek professional support. You may look for reliable accounting service provider firms, which are prominent in the market and known for excellent and timely services. Cogneesol is one such firm that you can rely on for your business accounting needs. We are providing high-quality accounting services, from audit to cash flow management, management reporting to financial reporting under one roof.
Since 2008, we have served and satisfied our clients (across industries) via our reliable, cost-effective, and customized bookkeeping and accounting services. Let’s discuss how we can help you; call us at +1 646 688 2821 or email to firstname.lastname@example.org.
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