When it comes to running a business, having accounting records that aren’t accurate is not an option. This is a crucial task that helps keep the business open and promotes growth. Accurate accounting is something that many small business owners overlook, not fully understanding it’s true importance.
So, if you are a small business owner who needs help with their accounting this year, here are five big mistakes to avoid:
- Failing to back up data. Do you have regular back-ups of your business data? If not, you could be vulnerable if your accounting system crashed completely. The business can end up sinking by losing track of who did and didn’t pay as well as other debts.
- Not routinely reconciling bank accounts. Business owners can see which checks have cleared, are outstanding, and if credits and deposits are done properly. If these aren’t being checked each month, an undetected problem can turn into a huge issue for your business.
- Failure of applying payments as receivables. Recording a payment from a customer properly is necessary. This allows you to track cash flow and tells you what the customer still owes you.
- Thinking cash flow and profit are the same thing. The amount of money that comes in and out of your business each month is cash flow. Profit is the money that is left over after all expenses are subtracted from the sales. Understanding this is key for proper recording.
- Getting personal and business finances mixed. It is highly important and essential that your business has its own bank account. This is where business income goes and where expenditures are paid. To float the business through a rough patch, you can infuse personal cash in that account for tracking purposes.
What other mistakes did we miss? Leave a comment or give us the answer on Twitter (@DirectCapital).
Crunch your numbers and see your cash flow is off? Direct Capital can provide quick and simple cash to help balance that for you. Call 866-777-0117 now or click the banner below to find out how.