Watch Out! Book-keeping errors SMBs fall into

If your books and accounts are sloppy, unmethodical and careless, you can’t expect to derive any insightful financial understanding of your company’s overall performance. Slipshod books don’t just beget naught; they usually lead to:

  • misinformation
  • ill-founded decisions
  • vulnerability and jeopardy of the company

Here are some practical ways to avoid typical inflammatory errors:

  • Don’t Be Chaotic: Paper trails don’t belong in a dusty shoe-box above a dusty cabinet. And the latter can’t fit 7 years’ worth of filing (which are the records you must maintain). You need to have a proper system to track bills, invoices, cash flow, and other monetary obligations or you won’t have a clue where it all went when you need to start filing taxes.
  • Don’t Drag Your Heels: Procrastinating or leaving it to the last minute overwhelms, muddles, and renders wrong. Instead of being in for terrible shocks in the form of tax etc., expect and prepare for them. These are things you can actually anticipate. If you learn to get your head around it, you can actually tax-plan, understand what categories are eligible for tax breaks or refunds, and find yourself ways to keep your revenue within your business.
  • Don’t Strive For Your Minimum Least: Your company’s financial success depends on your financial decisiveness. They are directly proportionate. Halfway measures will not avail. Accounting is a desideratum of any business. It is a constant ongoing process, without which the business can’t function optimally. With the scale of cash influx and efflux involved, maintaining books badly would be like a restaurant’s kitchen using the wrong ingredients and wondering why patrons are aghast.
  • Don’t Do Monthly Tasks Annually: Looking at financial statements, balance sheets and P&L just once a year defeats the purpose of accounts serving as insight. Demand these from your accountant every month. If you are outsourcing your accounting, the firm automatically takes charge of this. However, if you are remiss with furnishing details from your end, or don’t impress much on the need to have monthly tasks done monthly, they are highly likely to slack off and explain away any problems faced later with your tardiness. Chiefly, it is you who will be mired.
  • Don’t be unreasonable: Make the effort to understand what goes into accounting to understand what needs to come out of it. Then demand the right things within the right timelines (rather than being too lenient or too merciless). You may have trustworthy accountants. However, this doesn’t negate the requirement for business owners or managers to have a fundamental understanding of book-keeping and accounting. Without exception, all of the bigger decisions, planning or financial penetrations are built up on or derived from the very basics – book-keeping.
  • Manual & Automated Functions: Some tasks are manual but many can be automated using the right accounting software. QuickBooks, for instance. You save precious time, reduce common error tendencies like double entries, and you can submit files to banks online. Imagine higher reconciliation time, proper accounts tracking, smoother workflows, and so on. Additionally, such software accommodate functions specific to SMBs, which assist in the facility of usage.

So when the IRS and others come trolling, you won’t have just the least smattering of book-keeping; you can walk ahead confidently, with the added knowledge of running your business with the intelligence garnered just from within your accounts.

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