While you may try to handle your accounting on your own, it’s usually not the best idea, especially if you’re working with investors and managing payroll.
If you make a mistake in your accounting, you can end up with a huge mess on your hands. Therefore, we have compiled a list of common accounting mistakes your company may be making for you to review.
If you find that you are indeed running across these issues, we encourage you to think about outsourcing your accounting needs.
Mistake #1: Doing It on Your Own
You are an entrepreneur who is passionate about your business, and naturally this means you want to try and do it all on your own.
While this may work in the beginning, resist the urge to take it all on, especially your accounting.
Use your time to grow your business and manage your team and consider letting someone else handle your vital dollars and cents.
Mistake #2: Doing It Cheaply
Quality is what matters. When it comes to your accounting, saving money could end up costing you more in the long run, especially if you have to hire another accounting company to fix mistakes.
Don’t forget the saying, “You get what you pay for…”
Mistake #3: Not Reconciling Your Accounts
How will you know how your company is doing if you don’t reconcile your accounts?
This is where you get an overall and clear picture of your business. You’ll learn the following when you reconcile:
- How much money you have on hand.
- Which checks have cleared and which haven’t.
- What you’ve paid in fees.
- A look at automatic payments, withdrawals and deposits.
Reconcile your accounts on a monthly basis to make sure everything looks accurate, and so you can see if your business is on a growth track.
Mistake #4: Mistaking Profit for Cash Flow
Money comes in, and that’s great. But, don’t mistake cash flow for profits.
For example, your startup sells $50,000 in one week, and the cost to you is just $25,000.
This doesn’t mean you have a profit of $25,000. You need to account for problems that may arise, payroll, overhead and more.
The amount of money that comes in doesn’t always translate to a direct profit, so be sure and wait to spend this money until you’ve accounted for all of your costs.
Mistake #5: Misclassifying Expenses
You want to be careful when using expense accounts, and work diligently to create accurate expense descriptions.
When you misclassify expenses, your accounting doesn’t reflect what’s actually going on in your business, and it can ultimately cause you problems come tax time.
Do a thorough review of your expense statements on a regular basis to make sure things are being accurately accounted for.
Mistake #6: Not Backing Up Your Data
Many businesses are solely digital, yet they often put too much trust in their accounting software.
Ensure that either you or your accounting company backs up your data on a regular basis as it would be devastating to lose it.
You want to have your data stored in at least three secure places. For example, store it on your local computer’s hard drive, in the cloud, on a thumb drive or an external drive.
Final Thoughts
Proper accounting is critical for your company.
Whether it’s simply maintaining your books or invoicing clients, collecting payments, paying your bills, handling payroll or year-end reporting, it’s not something to take lightly because the growth of your business depends on staying away from the accounting mistakes mentioned here.
As a startup owner, you have bigger things on your mind like managing your business and growing your company.
Think about investing in outsourcing your accounting so you avoid making these accounting mistakes.
Are you a new startup ready to succeed? Are you looking to get your new business off the ground and watch it rise to success? We are here for you. We can help answer your questions and guide you through the process. Outsource your HR duties, finances, payroll and more to us. Contact Escalon today to get started.
