The 5 most common accounting mistakes small businesses could easily avoid
Running a small business may sound as a piece-of-cake project, but being responsible for every aspect of operations is not an easy task. Small business accounting and invoicing can be a big deal if you are not well-informed or had no previous experience. Given the fact that no one is perfect, accounting mistakes happen every day. However, you can minimize their chance of occurring and keep your business growing. We have previously discussed how productivity can be impeded by several factors.
In this article, we will reveal 5 commonplace mistakes that can happen even to the best of us and overall affect growth.
What normally happens is that you get overwhelmed by responsibilities and do not pay attention to small things that may have a great impact on the firm you worked so hard to build.
1. Not seeking professional help
Obviously you are a very capable person; you came up with a great idea, you know your industry inside out and established yourself in the market. It would be very rational if you didn’t follow up with the latest news inherent to tax legislation, deductions and financial reports at whole.
Hiring someone to handle your small business’s accounting matters may seem like an extra expense but we assure you will get a return on that “investment” in the long run.
An expert’s advice can save you money from overpaying taxes, applying deductions to your taxable income and many other accounting hacks you cannot just come by.
Moreover, a professional’s help combined with a cloud-based accounting and invoicing platform, such as Elorus, is the perfect solution for your small business or startup. You can provide access to your accountant and keep them fully updated on your tax obligations without you doing anything further. Using Elorus they can download tax reports and submit them straight to the IRS easily from the reports menu, saving you time and the stress of filing deadlines hanging over your head.
2. Not keeping up with Accounts Receivable
If you have ever paid attention to Accounting 101 you know that the “receivables turnover ratio” is a true indicator of a firm’s efficiency in terms of asset utilization over a certain period of time.
In simple words, collecting cash from your customers on time is essential to your business.
It becomes quite clear that you need to come up with mechanisms that, more or less, automate the collection process and leave no space for delays to your clients.
Also, not reconciling accounts timely can result in getting a distorted image of your cash flow operations. Via Elorus, you get a clear view of outstanding invoices so you can pursue their collection.
As a small business owner, you prefer cost-effective solutions that can get you the optimum results. You can use Elorus’s payment gateways to receive payments online once you send your client their e-invoice bearing a permalink. This link leads your customer to pick their preferred payments provider and proceed to the payoff with just a few clicks.
3. Not separating business from personal expenses
Perhaps the most common accounting mistake is not sorting your expenditures by personal and business-related ones. You may often use your business credit card to pay for personal stuff or vice versa.
At the end of the month, you end up not knowing for sure how much of the company’s cash you’ve actually spent on purchases for you and your business. By acquiring separate credit cards you get to have a clear image of both your personal and business expenses.
A small business can particularly benefit from an online invoicing and billing software that allows you to access your data from anywhere. You can enter a purchase record on the go, in a matter of seconds, via your mobile device. Elorus is a highly intuitive application you can use whenever you may be, as long as you have an Internet connection.
4. Use obsolete accounting software
An accounting challenge that most small businesses face is letting go of outdated processes such as spreadsheets and manual issuance of invoices that unavoidably lead to errors.
Either it’s a typo or a calculation error it surely does not reflect professionalism. The modern way of doing business eliminates all these problems and automates procedures to your advantage.
Elorus is ideal for small business accounting; you get to store records of transactions online. The application also allows you to set up recurring invoices to save up time otherwise wasted on repetitive actions.
5. Lack of a budgeting plan
“To plan is to choose”. We believe this is one of the most empowering quotes because it reveals the significance of planning in general. When it comes to a business this is a key factor towards success.
When planning ahead, you get to allocate cash according to your needs and reassess expenditures. Ultimately, you prepare your business for better and for worse and Elorus can point you in the right direction.
By providing detailed reporting of cash flows you get to know what goes in and out. Even though profits are a major indicator, cash flow reflects the true size of your business. This way, you can make forecasts, plan the funding of future projects and overall improve the performance of your company.