Start-ups often have a limited budget to work with. To ensure maximum effectiveness and efficiency so that not a single cent of their business capital is wasted, entrepreneurs usually take on several responsibilities at once. Since they cannot afford to hire an accountant on a monthly salary, these business owners often try to handle their company’s accounting needs themselves.
Does that sound familiar to you? If you are overseeing a start-up of your own, you may be experiencing a sense of déjà vu right now. However, some of these business owners may not have the accounting background they need to reconcile their company’s finances, resulting in costly mistakes that severely impact the organisation. Let us share the four common accounting mistakes many business owners commit, so you can avoid making them in the future.
Accounting mistake #1: Data entry errors
Data entry errors are still an everyday occurrence, mainly due to manual data entry. With a host of figures to key in, it is understandable that minor inaccuracies can happen. However, the incorrect input of even a single-digit can make it a nightmare to reconcile your financial figures.
If you still keying in your data manually, it is time to automate your business’s data entry process. There is numerous data entry software available, so you can find one that best suits your company’s needs. With this tool in place, you can eliminate such costly mistakes from your future accounting entries.
Accounting mistake #2: Not paying enough attention to bookkeeping
Effective accounting equates to an effective business. As every business owner may already know, effective accounting starts with a robust bookkeeping system. Proper bookkeeping ensures that no matter what transactions a company makes, whether minor or major, they get recorded and categorised correctly in the business accounts.
This essential process provides business owners with various benefits, such as a clear and reliable understanding of their business’s health and quick determination of its performance over specific periods. This information can prove essential when you need to improve your business or prepare for tax season.
However, bookkeeping can be an arduous process, making it challenging for entrepreneurs to dedicate the time to maintain their financial book since they also have to oversee their company’s daily operations. If you find yourself in a similar scenario, it is best to seek the help of a specialised audit firm.
At Ackenting Group, our experienced accountants have overseen the bookkeeping needs of prestigious clients from various industries. No matter your industry, you can rest easy knowing your company’s accounting needs will be well taken care of. We also provide a suite of professional accounting services to suit your business’s every need.
Accounting mistake #3: Lack of reconciliation between the company’s books and bank accounts
Reconciliation is a vital accounting process every business must undertake to ensure the account balance listed on the company’s financial books is up-to-date, accurate, free of errors, and matches the balance reflected in their bank accounts.
It is indispensable because every organisation needs to validate the accuracy of its financial information. This allows entrepreneurs to determine the status of their finances and take note of any discrepancies that may have occurred during financial reporting. Through regular reconciliation, poor cash flow management can be eliminated at its very core.
Accounting mistake #4: Misclassifying capital assets as expenses
Companies need to factor in their capital assets’ depreciation into their accounting records. However, several businesses misclassify this as an expense instead of labelling them as a depreciable asset. Depreciation occurs over several years, and it cannot be deducted in the asset’s year of purchase.
Everyone makes mistakes. After all, as the adage goes, “To err is human”. While they are excellent learning opportunities, accounting errors can have severe implications for a business’s finances. As such, we hope what we have shared has provided you with vital information on how to manage your company’s accounting record, and you can avoid repeating the past mistakes of previous entrepreneurs.
If you require any assistance on accounting services, feel free to drop us an email at firstname.lastname@example.org or contact us at +65-66358767. At Ackenting Group, we offer a complimentary 30 minutes online consultation for us to better understand your business requirements.