In small businesses, our main focus is on production and generating revenue – vital traits for growing the business. However, a business has more than just these necessities. Any performance within business needs to be measured to understand if the efforts are yielding required results. Hence, you need to keep track of every essential aspect to run the business successfully.
One of the neglected aspects in small businesses is “accounting” which reflects the financial health of your business. From our extensive international experience at KGRN Accounting Associates, let’s explore what are the common accounting mistakes, so that you can avoid these and have your accounting in top shape at all times.
The size and strength of your business is determined by the revenue and profit it generates. Hence, it is very important to maintain records of income and cost. Receipts of payments made for various business expenses as well as income from various sources or any other source (e.g. payments received from customers, bank interest) are mandatory for calculating accurate revenue and cost. Reconciliation of various bank accounts and its transactions is also a crucial part of the process.
While maintaining costs, it is very essential to have a proper categorization of the various business cost. For this, you need to keep personal expenses separate from the business related expenses. Not doing so, not only leads to lower the profit margin of the business but also hinders the business growth as re-investment fund also is lowered.
The health of your business needs to be assessed periodically to evaluate if things are going well. This will help to achieve short and long term goals or if any corrective action needs to be taken to boost the performance. It is always beneficial to sense a problem as early as possible to avert any major damages. Hence, maintaining periodic review is a key driver.
No matter how small your business is, it is obligatory to file income tax return on time. Non-filing or delay in filing tax returns may impact business in long run. It also puts your business credibility at stake.
Information Technology is a necessary magical wand of modern age. It makes many cumbersome tasks easy and saves time. Since time equals money, it also saves money. Verifying and tallying manually entered data, taking regular backups, upgradation of the system when required are a few of the important factors where IT works its magic.
“Audit” is a dreaded word for any accounts team and/or business owner. However, it is critical to maintain the sanity of the accounts and keep it audit-ready. Conducting external audits occasionally will help in catching the issues/loopholes. It also provides you with valuable inputs that might aid the growth of your business.
Make sure to maintain a clean and up-to-date accounting practice by avoiding these routine misses. This will not only improve your business credibility but also help you propel your business ahead.
Have any interesting misses that served as experience for your business? Do write in with your comments and let us know.