For the first year Gould Cloud Accounting was in business, maintaining my own books was a low priority and I fell into some common traps. I know first-hand how enticing it is to choose the easiest path in the moment, only to have a lot of painstaking catching up to do later – or worse, not being able to pull together all the information I need.
Starting a business can be a challenging experience, especially when it comes to managing your numbers and staying on top of your financial management. Unless you’ve got some experience in finance, the bookkeeping and accounting requirements can be quite daunting. Even with today’s helpful cloud accounting platforms and apps, there’s always the possibility of making a simple accounting mistake. Or you could be like me and have all the necessary accounting experience, but lack the time or good habits to do things right.
The top five accounting mistakes to avoid
‘Doing the books’ is probably not the favorite part of running your business. But the better your bookkeeping, the more oversight you have over the financial path (and future success) of your company.
There are plenty of traps that a newbie owner can fall into – and even a few hurdles that the more experienced business owner may trip over from time to time. Let’s take a look at the five most common accounting mistakes:
1. Mixing your personal and business finances – Guilty! When you don’t separate your personal and business transactions, this blurs the lines and makes it difficult to track your income and expenses accurately. It can also lead to personal spending being mistakenly counted as business deductions, which would be problematic if you are audited.
Solution: Open separate business and personal bank accounts and keep them entirely separate and distinct. If you rely on business income to pay personal bills, you can set up an auto transfer of funds from your business into your personal accounts, which can easily be tracked in your books as an owner’s draw.
2. Skipping the record-keeping process – if you fail to keep receipts, log your expenses and keep proper records this can be a major problem further down the road. Detailed records are crucial for tax filing, budgeting and identifying spending trends. And trust me, you will end up spending far more time trying to recreate your records after-the-fact.
Solution: keep digital copies of all receipts and be sure to keep your bookkeeping up to date and well-managed. To keep things from snowballing, we recommend reconciling your bank transactions weekly.
3. Mischaracterizing your expenses – throwing all your expenses under ‘miscellaneous’ makes it far harder to analyze your spending and cashflow. With every expenditure logged under a specific account from your Chart of Accounts, you can quickly run reports, review your spending and look at ways to improve budgets and cashflow.
Solution: Categorize your expenses properly (rent, marketing, supplies etc.) to understand where your money goes. When GCA takes on your bookkeeping, one of the first things we do is eliminate catch-all accounts.
4. Winging it when filing your taxes – Taxation is complicated and it’s easy to make costly mistakes if you’re not prepared and organized. Don’t wait until tax season to sort everything out and make sure you’re aware of all your business tax liabilities.
Solution: Set aside funds for taxes throughout the year, and consider consulting a tax accountant to ensure you’re filing correctly and taking advantage of all potential government deductions and tax incentives. We at GCA can get you there, and then we work with your tax accountant (or one of our tax accountant partners) to make sure it’s done right.
5. Failing to get proper accounting advice – if managing your finances becomes overwhelming, don’t be a hero. Cloud accounting software can automate some of the key tasks, and a bookkeeper can handle day-to-day record-keeping.
Solution: think about outsourcing and partnering with an experienced accounting firm to get real peace of mind and improved financial management.
Talk to us about outsourcing your key accounting tasks
You didn’t start your business to spend hours working on your bookkeeping and accounts. Why not outsource your key accounting tasks to us, and put those hours back into your business.
As your accounting partner, we can:
- Show you how to clearly separate your personal and business finances
- Set up your bookkeeping to be as streamlined, automated, and efficient as possible
- Show you the best software tools and processes for managing your expenses
- Liaise with your tax accountant who will take care of all the complex tax filing tasks
- Provide reporting, management information and advice to guide your decision-making
Get in touch today to talk about outsourcing your finance tasks. Schedule a chat here – and as always, our consultations are complementary, no-pressure, and no-obligation. We would love the opportunity to discuss your accounting needs and how Gould Cloud Accounting can help.
