As business owners, there are many things you can’t control. Although that’s the case, there are also things you need to take control of, and one of those things is accounting.
Accounting mistakes, whether small, big, or accumulated, can destroy your business from the inside. A simple miscomputation can be detrimental for the business.
Accounting mistakes can happen to any business or entrepreneur. Check out this list of common accounting mistakes and how to avoid them completely.
Personal and Business Funds
Mistake: Combining Personal and Business Funds
Owning a business means it has its own costs separate from your personal expenses. Putting the money and expenses of both personal and business in one account will only result in confusion and huge computation mistakes. This can swap budgets that were supposed to be for the business or your personal life. It will also cause you to file incorrect taxes and receive penalties.
Solution: Always Separate your Personal and Business Funds
Save the business from confusion. Make sure to have a separate account for your personal and business to avoid using the budget of a different account and overspending since you know the exact amount for a specific fund.
Mistake: Throwing Out Financial Documents
Decluttering is a good habit to do from time to time, but there are some things better left untouched. Throwing financial documents because you were decluttering or irresponsible enough to do so have its repercussions. Receipts, bank statements, or other financial documents serve as proof for the numbers written in your books. Without it, you don’t have concrete evidence of the transactions written on it.
Solution: Hanging onto These Records
Basically, the safest time to cling into these documents is from three to five years from the date of the transaction. Always make sure to place these records in a locked cabinet or drawer to keep it safe and away from other documents. Another method is storing these records and documents digitally to have a backup in case the paper records get damaged.
Mistake: Neglecting to Update and Check your Books
Updating your accounting books is a time-consuming task. If you’re part of the population who leave the book updating to the last minute, better think again. Doing so will only make you become more prone to mistakes, miscalculations, and errors of omission or unrecorded transactions.
Solution: Provide Time
Setting time aside to organize your expenses and updating your accounting books can do wonders to your business. Even if it’s during the end of the week or every two weeks, it lessens the time you’ll consume and the load you need to input. Entrepreneurs can also invest in accounting software to further reduce the time of updating and recording your books.
Bonus Solution: Hire an Accountant
Definitely, updating accounting books is time-consuming and eats up your focus. By hiring an accountant, you can start focusing on growing your business instead. Small businesses can opt for startup accounting services to get started.
Experience cost-effective startup accounting services from a trusted accounting firm in the Philippines. JCSN has highly experienced professionals with more than a decade of experience in providing efficient and precise accounting outsourced services to small and medium businesses.
Focus more on your business and let JCSN handle the numbers. Call +63 2 8247961 or email email@example.com to maximize your time for the business.