What’s Wrong With Small Business Accounting?
Small business accounting is a critical process that can make or break a business. However, there are many things that can go wrong with this process.
One of the biggest issues is that small businesses often do not have the budget to hire an accountant, so they have to do their own bookkeeping. This can lead to mistakes and missed opportunities.
Additionally, small businesses may not have the time or the knowledge to properly track their finances. As a result, they may not be able to make sound business decisions, which can lead to financial ruin.
A recent study by a popular university in the US found that two-thirds of small businesses surveyed do not maintain accurate financial records. That is a staggering number, and it’s a problem because accurate financial records are essential to making sound business decisions.
Common mistakes in small business accounting
If you are a small business owner, it is important to understand the basics of accounting and to make sure you’re keeping accurate financial records. Here are a few of the most common accounting mistakes small businesses make:
1. Not keeping track of expenses
If you do not track your expenses, it is difficult to understand where your business is making money and where it is losing money. It is also difficult to make informed decisions about where to allocate your resources. Make sure you keep track of all of your business expenses, including petty cash expenses, and make sure your records are accurate.
2. Not tracking inventory
It would be easy to underestimate or overestimate how much inventory you have on hand without tracking your inventory. This can lead to ordering too much or too little inventory, which can hurt your business’s bottom line. Make sure you track inventory levels and movement so you can make accurate ordering decisions.
3. Not recording receivables and payables
If you do not track receivables and payables, it is going to be difficult to know how much money your business is owed or how much money your business owes. This can have a big impact on your cash flow and your bottom line. Make sure you keep track of all receivables and payables, and make sure your records are accurate.
4. Not reconciling bank statements
Being unable to reconcile your bank statements can lead to inaccurate financial reports and potential financial problems for your business. Make sure to do this regularly and make sure your records are accurate.
5. Not calculating taxes properly
You could end up paying more or less taxes than you should. Not calculating your taxes properly can have a big impact on your business’s bottom line. Make sure you understand the tax laws and make sure you’re calculating taxes correctly.
Why is it hard to find accountants?
One reason it is hard to find a good accountant is that there is a lot of competition. When you go on a job board and search for accountants in your area, you’ll get a list of maybe a hundred local accountants.
What is hard is finding the one with the best qualifications and experience. It can take a while to interview the accountants in your area and talk to each one personally. Try asking them questions about their accounting degree, what they did before getting their CPA and how they would handle a situation if a client asked them to do something illegal.
Finding the right accountant for you can be a long and tiring process. It is a good idea to do research and find someone that specializes in the industry you are in. An accounting degree is a great place to start, but keep in mind that there are many degrees that qualify someone as an accountant. The best thing to do is to ask around. Ask friends and business acquaintances who they use and why.
Conclusion
There are many different reasons why small businesses do not set up proper accounting from the start. The most common reason is that they don’t know they need to. They might not realize that the numbers they are posting in their checkbook aren’t accurate, or they may not know what the numbers actually mean.