While bookkeeping and accounting functions might not have been part of your plan when you decided to put up your own business, the reality is that you cannot run your SME without basic accounting knowledge.
At the very least, you must be able to keep track of your spending while keeping tabs on your financial statements. These two may sound simple enough but it really isn't. This is why most entrepreneurs encounter small business accounting problems when organising their own books.
So, what are the common pitfalls that you should avoid this time around? Here's a quick glimpse of some of the accounting mistakes you should stay clear of to start the year right:
Putting receipts in the trash
Organising your invoices and receipts is a must-do for every business owner. Beyond that, keeping the invoices and receipts is also equally important. For one, having a copy of the financial transactions and purchases your business has made for the year makes it easy to come up with financial statements in the long run. Moreover, these records are also vital in case your business needs to undergo a random audit check under the Australian Taxation Office (ATO).
It is very likely for young entrepreneurs to put off the task of accounting and bookkeeping since they do not want to do it, anyway. Be warned, though, that delaying these tasks will rob you of the lengthened period you need to get your financial data in order. After all, number crunching functions are tedious tasks--getting these done in a very short span of time will most likely lead to errors and miscalculations.
Poor petty cash management
Every business needs some petty cash at hand just in case there are random purchases and payables that need to be settled immediately in cash. Note, though, that it is not enough to have petty cash at hand; rather, you must also be aware of how these resources are being utilised. Otherwise, you will lose track of how a significant portion of your much-needed financial resources have been used. And that could add a definitive strain to your budget.
Being your own accountant
It is very normal for startup business owners to take charge of basic bookkeeping and accounting. However, as your business grows, so does its accounting requirements. And more often than not, a complex set of books require the assistance of an accounting expert. Seeking advice from an accountant or a tax adviser will significantly help you adhere to tax compliance standards while keeping your books in order.
For most entrepreneurs, accounting and bookkeeping roles are frustrating and bothersome. But, this does not mean that you should not take it seriously. If you are aware of the errors in your accounting processes, seek available resources immediately to help you change all that. Your business finances will improve tremendously if you follow this advice.
Do you need more accounting and tax advice from qualified professionals? Contact D&V Philippines to get in touch with our qualified experts.