This is a sponsored guest post.
Accounting is an important part of any small business. While it might not be the most glamorous part of your job, messing up your numbers can stunt the growth of your business, so you want to stay on top of it early and often. Before you dive in and start balancing your books, make sure you stay away from these 5 common mistakes.
1. Only Focusing on the Short Term
When you’re so involved in the day-to-day operations of your business, it’s easy to become fixated on quick wins and short-term success. However, when you’re looking to grow and expand, it’s important to remember that accounting is not just about keeping track of today’s numbers, but forecasting future growth and identifying financial risk. Check out this Entrepreneur article, which identifies best practices for forecasting revenue and growth, and show you how to use gross margin and profit margin to reconcile revenue and expense projections.
2. Not Invoicing Clients Fast Enough
Don’t wait. Invoices should be sent immediately after the product is delivered or the project has been completed. The sooner you bill a client, the sooner you get paid. Because your invoicing is tied to your cash flow, it’s important to have invoicing processes that are as streamlined as possible. In many small businesses this can be a challenge. A free invoicing app like Viewpost can help improve efficiency and eliminate paper when you invoice your clients. Learn more about it here.
3. Mis-Categorization of Expenses
There are fairly standard categories for expenses you can follow. However, expenses are often entered into the wrong categories or too many new categories are created. This can make balancing your books confusing and waste a lot of time. If you need help, this simple guide includes a list of general guidelines for standard categorization of your expenses, or check with an accountant for expertise and guidance. Better safe than sorry!
4. Trying to Do Everything Yourself
When you first started your small business, you may have been the only person managing finances — maybe you still are. However, as your business grows, managing your books on your own can become way more challenging. As a business owner, your time is valuable. You should be focused on what your business needs to grow. If you’re spending all your time on the accounting aspect of your business, the rest of your business may begin to suffer. Be aware of how you’re spending your time and don’t be afraid to hire an accountant at some level. You may not need a full-time bookkeeper right off the bat, and can instead turn to outsourced services or a part-time contractor.
5. Forgetting to Make Entries
This might seem like a no-brainer, but it’s the most important key to effective accounting. From small transactions to large payments, it’s important to record everything. If you’re not recording deposits accurately or depositing funds into the correct accounts, you’re messing with your bottom line. Find an intuitive accounting system designed for small businesses and set aside time every week to keep it up to date.
As a small business owner, other issues may often take precedence over accounting. However, it’s important to remember that your accounting system is one major aspect of your small business and should be seen as a long-term investment. If you take an active approach to your bookkeeping, your business will see a healthy boost in performance!
Viewpost created a business-to-business network that removes the barriers businesses face during the exchange of invoices and payments. By democratizing information flow, simplifying process and removing costs and complexity that deter adoption, Viewpost effectively connects people to payments within a network of possibilities.
With a single, free connection to the secure Viewpost® network, businesses of any size exchange electronic invoices and share invoice status updates with their trading partners at no cost. Viewpost members also exchange payment for those invoices electronically, sending funds directly between their accounts at any bank. To better manage cash flow, members with extra cash can offer to pay early for a discount and those who need cash can ask for early payment. And at the touch of a button, transaction data is seamlessly pulled from or into an accounting platform. All, without requiring businesses to change their current workflows.
On the Viewpost network, trading partners easily connect with one another to save the time, cost and aggravation associated with invoicing and payments. Viewpost eliminates paper invoices and checks, provides real-time visibility into receivables and payables, and improves cash flow to make everyday business more efficient than ever. It’s simple, and good for everyone.
6 Replies to “Guest Post: Common Small Business Accounting Mistakes and How to Avoid Them”
Thank you so much for this explanation! i am wondering if you have a list of deductions. Are gym membership deductible for me an my partner?
You would have to reach out to the author of this post or another tax professional to get your answer; I am not an accountant.
Thanks for this very comprehensive article. I have very insufficient knowledge of accounting. This article is very helpful especially to a person like me who is an accountancy student and a small business owner.
I believe that when you are a business owner, you should know at least the primary concept of accounting. Thanks for sharing this article , a big help I can say.
Thanks for sharing this. I also believe with what you said. Hiring an accountant will make time for the business owner to organize other things in the business. I also believe that having someone who have knowledge about accounting and other legal related things about is a good thing for the company.
I agree with what you said. I personally put entry in the wrong category when I do accounting. Thanks for sharing this. This will help me do better in accounting.