Accounting traps will eat your margins, kill your profits, and are a constant problem that plagues small business owners. You can avoid common accounting errors with professional training and proper preparation.
Unfortunately, business owners pay for accounting slipups long before they actually show up in the reports. Outsourcing accounting services to Accounting & Management Company is much cheaper than correcting expensive mistakes yourself. It takes a long time to dig through financial records and spot mistakes. On your own, accounting traps are painful to climb out of and nearly impossible to fix by yourself. Don’t be penny rich and pound poor. Get professional advice to avoid accounting pitfalls.
25 ways to protect your profits & avoid Accounting Traps
1. Escape Accounting traps by managing your business like a project
Every small business needs to generate and maintain a positive income flow. If you do know how to manage your money the business can go belly up. Negative income means you cannot cover your bills, get financing, buy supplies, or afford help for additional projects. Fortunately, Accounting & Management Company can manage your business’s cash flow and help get the debt monkey off your back and escape the fear of bankruptcy.
2. Accounting Traps Can Spring Up When You Don’t Seek Professional Help
You’ve heard the adage “life is like accounting everything must be balanced” describing entrepreneurs who put in hours and hours of personal time into their business trying to keep every penny and everything else suffers. As a business owner, it’s more advantageous to manage your money rather than let your money control your business.
It’s counterproductive to sift through piles of financial records and transactions trying to find and fix accounting errors and rebalance your books. You can achieve much better results with professional support.
3. Count On Accounting & Management Company To Help Your Staff Avoid Accounting Traps, Mistakes, & Setbacks
Let’s get real, setbacks happen every day to well-run small businesses. Sometimes your data entry person may inadvertently enter duplicate information, mislabel transactions, or ignore reoccurring issues that will lead to big mistakes down the road.
Outsourcing your bookkeeping and accounting services to a professional is a smart move. A fresh set of eyes can reveal key sticking points and unnoticed mistakes. Work with AMC and get a better perspective to avoid accounting traps.
4. Money Mistakes Are Expensive Accounting Traps
No business owner wants to play chase the accounting mistakes game. Often, entrepreneurs can’t see looming issues and can fall prey to avoidable mistakes. Accounting traps are very expensive to crawl out of. Don’t bury yourself in debt. Accounting and bookkeeping errors are easily detectable and correctable by an expert advisor but left unchecked will jeopardize your business.
5. Failing To Follow Procedures Can Generate Accounting Traps
Independent and privately owned businesses should have a check and balance policy to review and oversee their accounting and bookkeeping process. Don’t get complacent, use a standardized procedure to routinely assess and measure performance and profitability.
Accounting & Management Company believes that consistency leads to profitability. We can customize your company’s operating procedures, policies, and prospect manuals to serve as a step-by-step checklist and ensure consistency when welcoming new clients on board.
6. Set Business Goals, Build A Budget, Avoid Accounting Traps
Establish realistic objectives and set your sights on a reachable goal. Create a flexible business plan to account for unexpected accounting issues and track performance. Set limits to control spending, benchmarks to chart progress, and targets to reach higher. Most importantly, make your plan scalable to adjust to your clients’ requirements.
7. Data Entry Errors Are Common Accounting Traps & Small Business Nightmares
Good grief, data entry mistakes, and human errors occur every day. Fortunately, they are detectable and correctable with regular audit reports. Cross-check actual project budgets with current job costs to identify mistakes and potentially harmful errors. Adjust workflow and spending to control a profitable outcome.
Run client receipts or merchant installment reports verifying charges and payments are legitimate.
Balanced receivable, confirm payables, and reconcile any anomalies to confirm no information was cross-contaminated.
8. Record Expenses
Be meticulous when recording and saving bank statements, invoices, employee payroll records, and any other pertinent information. Save project expense documentation and support evidence of income, and deductions that are declared on your business tax returns. Go over these documents with a fine-tooth comb to ensure there are no mistakes or exclusions.
9. Retain & Organize Your Small Business Receipts
Save your receipts and keep them organized. Sort, file, and catalog receipts to isolate and identify non-taxable expenses. When you’re busy working and concentrating on hitting deadlines keeping track of receipts is the last thing on your mind. Retaining receipts can drive you crazy but can pay dividends at tax time.
10. Inadvertently Applying Transactions To The Wrong Period
Hiring temporary help to assist your accounting department and sharing data entry responsibility increases the potential for accounting errors. Accidentally recording transactions in the wrong time period and re-entering the same transactions in the correct period will cause duplication errors. It’s never advisable to edit or revise spreadsheets data after filling year-end taxes.
Accounting & Management Company’s clients prefer QuickBooks because it has a prior period lockout feature that prevents duplicate data entry.
11. Re-Assess & Update Account Balance Sheets
Check your balance sheet to see if it is consistent. If your assets aren’t the same as your total liabilities and final equity, then it’s time to look for the mistake. Once the error is located you can reverse the wrong entry and then use a second journal post to record the transaction properly. Another option is to offset the wrong entry with the correct amount to nullify the mistake.
12. Incorrect Revenue Or Expense Balance Totals
Income accounts should have positive balances. Expense accounts should have debit balances. Recording transactions that are not accurate or attaching correct transactions to the wrong account are common reasons for out-of-balance errors. Double entry, duplicate adjustments, and misclassifying financial accounts can also throw off your balance totals.
13. Review Your Revenue Statement For Inaccuracies
First, confirm that your expenses on your income statement and revenues balance precisely. It’s good practice to review your accounts quite often for accounting deficiencies. If the numbers don’t add up pull the account details and review the entries to identify the error.
14. Incorrect Asset & Liability Amounts
Incorrect recording and posting entry errors is one of the most overlooked slipups that causes assets and liabilities to be out of balance. Asset account sheets should have debit balances, and liability account sheets should have credit balances.
15. Equal Out Your Balance Sheet
Review your reports to confirm assets and liabilities balances and have the correct totals and both balance out. If your accounts don’t balance examine the account details to locate and correct the mistake. Review assets and liabilities spreadsheet reports as part of your regular weekly accounting maintenance.
16. The Biggest Accounting Mistakes Are Caused From Not Backing Up Your Financial Data
Can you imagine if all your financial and account records are no longer accessible? Scary right? Corrupt databases are more common than you might believe. If you don’t have a current backup, you’re most likely heading for big trouble. Is time to get out your checkbook because it’s going to be very expensive to retrieve your information and nearly impossible to fix. Even if you do retrieve the database, some or all of the supporting files may be corrupt.
Always, and I mean always, back up your financial database daily. Preferably to a secure cloud server or off-site storage.
Accounting & Management Company recommends using the automated daily backup feature in QuickBooks to keep your application, accounting records, and database safe and secure. It’s good practice to routinely retrieve a clean backup off-line to make sure it’s functioning correctly. Then, if your system should crash or your accounting files become corrupted you can reinstall from a clean backup and pick up where you let off.
17. Be Business Wise & Supervise
If you are handling your accounting in-house, your staff should have regular training and supervision to be effective. An ill-advised accounting staff member can accidentally destroy your accounting data and financial records, causing false reporting and wreak havoc on your company’s finances.
Accounting & Management Company provides accounting system assessment, design, installation, and ongoing QuickBooks training for your staff to avoid accounting mistakes.
18. Accounting Traps Will Stop Your Business In Its Tracks
Hiring a new bookkeeper or accountant can be a stressful process. Finding the right person and getting them up to speed can take quite some time. Accounting & Management Company can assist you with your hiring and staffing challenges by providing comprehensive screening, training sessions, and quarterly reviews to ensure that all employees are entering, classifying, recording and calculating financial information accurately.
19. Stop Wearing Too Many Hats
Entrepreneurs usually have type-A personalities and preferred to get things done quickly. Therefore, they don’t often think twice about tip-tapping their way through the financials. This can-do attitude, without understanding accounting principles and federal, state, and local laws and industry guidelines can be harmful to their business and employees. Additionally, miss managed books and incomplete employee records can result in thousands of dollars in penalties and fines.
Outsourcing your financial needs to Accounting & Management Company is a great option to save time and money. Our services can keep your business compliant with tax laws, payroll regulations, and keep your books accurate and up-to-date. With AMC as your business and financial manager, you can tap into expert advice and years of experience to grow your business.
20. Delegate Responsibility & Monitor Performance
A lot of entrepreneurs treat their business like a DIY project. Running a business is challenging, endless, and constantly evolving. At some point, your day-to-day workload reaches critical mass, and you simply cannot handle it all on your own. Letting go of responsibility is difficult, but it doesn’t mean losing control. Delegating bookkeeping and accounting responsibilities and outsourcing your heavy lifting to Accounting & Management Company offers lower in-house costs, better control, and a huge competitive edge.
21. Misclassifying Expenses are Avoidable accounting traps
Accounting systems for small businesses should be easy to use and simple to understand. However, even basic accounting systems require proper training to operate the software effectively. Inexperienced employees can select the wrong account when recording transactions. Misclassifying expenditures will blast a caustic ripple through your worksheets and make your spreadsheet out of balance. Overinflated information will not properly reflect what’s on the books and generate unreliable reports. Misclassifying expense is a big headache for small business owners.
22. Intermittently Review Your Expense Reports
Don’t wait until the end of the year to find out your expense reports are way off. Unexplained transactions that do not mirror the actual expenses are key indicators of missed classified expenses. In-house recordkeeping should be supervised. Mandate periodic expense reports, and assets and liability balance sheets reviews to catch and clean up accounting mistakes before they raise a red flag with Uncle Sam.
23. Post Income & Expenses Appropriately
Keeping all your transaction on one sheet is not a good idea for entrepreneurs. Every incoming or outgoing transaction should be assigned to an appropriate category and get attached to a specific account. Companies of all sizes can become unorganized. Sloppy inventory control, scheduling issues, invoicing mistakes, unbalanced income, late expense reports, and messy books cause cash flow headaches, late nights, and left unaddressed, they can wreck your business.
24. Keep More Of What You Make
Some of the best-performing companies around Pittsburgh trust Accounting & Management Company to manage their accounting records. AMC can help you stay on top of your business so you can control your finances. We know the ropes, the books, and how to handle your numbers!
25. Catch Accounting Mistakes
Eliminating accounting and bookkeeping mistakes will help you prepare year-end tax reports much smoother. Tax time is not the right time to be scrambling through spreadsheets trying to reassemble and balance reports. If your books are a mess and your spreadsheets don’t add up, the audit monster may come calling.
Don't Fall Prey To Accounting Traps
Schedule your free consultation with an expert at Accounting & Management Company & learn how to avoid these dreadful accounting traps.