Small businesses frequently tend to handle their own accounting to commence with. This can be to save a few bucks or because the volume business activity is small.
Accounting is much more than a merely calculator work, and when an error arises, it can cost the business significantly. Making a mess of the numbers can skew what is actually happening or perhaps lead you to make the poor decisions from an unorganised data.
Small businesses often have accounting mistakes because they haven’t had the proper guidance or support. Here are major 5 to avoid;
- The Plate Spinner
You’re an entrepreneur now. You’ve done it — broken out of employment and pushed into the tough world of running your own business. It’s not without its thrills, but you can sometimes become too involved and end up doing everything. Even things that you aren’t great at!
Now when you first start out, you probably are going to be the person heading up your marketing. You definitely will be the one driving the sales and as above, you probably decided to have a go at maintaining your accounts as well. The problem arises when you are trying to spin too many plates and end up letting the quality of your service deteriorate, and it can start costing your business. You need to know when to delegate.
Your time is your biggest asset to begin with, and the business needs your attention to grow and prosper. It’s worth engaging an accounting specialist to take this burden away, and if he is good, he can even advise and help your business to grow further.
- The Big Spender
You’ve been doing well the past few months. Those sales opportunities have been booming, and you’re having a great time. There’s plenty of revenue in the company so far, but the only issue is that people have not been paying on time. You start to struggle to pay your bills because you are waiting for your customer to settle their invoice. You are making money though so how is this happening?
Profit and Cashflow are not the same. They affect your business in different ways and offer a different point of view on how your business is really doing.
Cashflow, in simple terms, is the inflow and outflow of funds within the company from financial activities, operations and investments. Your profit is what is left once you have deducted your business expenditure from the sales revenue.
A profitable company can go into trouble if the cash flow is poor — managing your spending and your credit control is vital to survival. Whether it is picking up the phone or using an automated system such as CHASER, you need to ensure that the customers are paying you.
- The Mixer
This can become messy at a rapid pace, so you have to open a business bank account as soon as you’ve registered your business. Be it a sole trader, partnership or a Limited Company. It’s a slippery slope if you operate out of a personal bank account, so it’s advisable to run all your business income and expenditure through a separate, business bank account to help keep everything in control.
It’s still okay to pay for things personally on behalf of the business, sometimes this happens, but it’s crucial that you keep records of these so you can claim it back against your business, hence you are reimbursed.
Keep your personal and business records separate for less stressful, pain-free record keeping.
- The Thrifter
It’s always tempting when starting out in business to go for the cheaper options out there. You’re not sure how your business will perform and if you’ve even made the right decision! It’s understandable that you don’t want to put a load of your resources upfront for something that might not turn out as you expected.
The phrase “cheap and cheerful” also goes hand in hand with “You get what you pay for” and if this is your business and your customers that are affected by poor quality of work or cheap design then you’re going to regret not going for quality over the price.
It can end up costing you more money as well. You employ an accounting specialist that has the cheapest rate, and this seems like a great idea to begin with. When the mistakes start appearing and lack of guidance or late tax filings then you’re going to wish that you saved yourself the hassle and went for a quality service to begin with.
This also applies to your products, your website, business cards and pretty much everything that will affect your business or how your customers will view your business. This doesn’t mean go all out from the word go and put your cash flow in danger but choosing right from the beginning can save you the hassle and costs in the long-term. Cheap prices usually lead towards low quality service.
- The Technophobe
The digital era is well and truly amongst us, and it’s never been easier to get a business up and running. Most service businesses can operate from anywhere with a WiFi connection, and business is truly mobile these days. Many accounting experts live and die by Microsoft Excel and are all to ready to give you a nice spreadsheet for you to keep your records but this is also archaic now, and your business needs all the help it can get!
This is why a cloud platform is the key to success. Software companies like Xero and Quickbooks really ensure that your bookkeeping is easy to manage, and there’s plenty of software services out there to help you with inventory, sales pipelines, reporting, e-marketing and social media. Everything that a new business will need to help keep things as smooth as possible.
There’s going to be a lot on your mind once you’ve just started your business. You’re out to change the world or to make people’s lives easier or even just to show everyone your amazing product. Don’t let your business fall foul of accounting mistakes and trying to juggle everything at once.
See the accounting side of things as an investment that will help your start-up to become established as a functioning, profitable business and you will be able to make informed, business decisions on sound financial data.
If you have recently setup your own business or are thinking about it and would like to speak with an accounting specialist then please get in touch and we will be more than happy to assist.
