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Mistakes happen, especially when human error is involved, but when these mistakes are related to accounting, the results can range from a headache to being costly, to actually detrimental. Many of these errors occur when whoever’s taking care of the company’s accounting doesn’t quite know what they’re doing – a situation that can be avoided by either hiring an experienced professional or utilizing tools that will automate processes and reports and eliminate the margin for human error. Another way to avoid them is by simply being aware of the most common ones and paying close attention to the measures you can take to prevent them.
As you may know, Assets = Liabilities + Equity. If there is just one tiny mistake in an entry in any of these categories, the entire equation will be thrown off and you won’t end up with matching figures. These errors are often due to an incorrect amount being entered, which can happen in the blink of an eye with innocent mistakes like typing an extra zero or writing ‘91′ instead of ‘19′. Another common cause is incorrectly classifying items, meaning putting an asset in the liability list or vice versa. Although this may not lead to an unbalanced number at the end, it may convey an inaccurate image of the company’s financial state.
Especially for smaller purchases, it’s easy to forget to include everything in your books. Having loads of receipts scattered all over the place can be a huge nuisance, but if everything isn’t recorded, you can run into big problems later on. Ideally, getting into the habit of digitally recording expenses each time they’re incurred is the most reliable and painless way to avoid this situation. Many accounting software provides handy apps that can be used to scan receipts on the go, so you can be both paper and worry-free.
As a small business owner, it’s easy to fall into the habit of allowing all of your bank accounts to get mixed up, using the business card to pay for a dinner here or the personal card to pay for a bill there. When it comes to declaring taxes, things can get quite messy if you’re not able to remember and prove which side each expense belongs to, leaving you with a range of possible unpleasant scenarios, the worst being an audit that you don’t pass. Using your personal funds to cover company expenses and forgetting to declare as such can also lead to you missing out on deductions you’re entitled to, and therefore paying more taxes.
We get it – there are things you’d rather be doing than rummaging through receipts and crunching numbers. However, putting these important tasks off can mean paying for it later, big time. If the reports aren’t run at the frequency that they should be, things and numbers will surely start piling up and getting lost, leading to even further mistakes in calculations when you finally get around to taking care of business. Software that automatically generates these reports will help with solving this issue and take that load off your shoulders.
Some of these scenarios are easier to avoid than others, but with a little discipline and the help of some tools to alleviate your accounting woes, these unfortunate situations can be easily dodged. Many can be used as stand-alone solutions and some should be used in conjunction with a professional, but one thing is for sure – you’ll end up with fewer mistakes with them than without them.
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