Accounting is a language that scares most people. There just seems to be no way of perfecting the trade. Even the most experienced accountants make small mistakes every so often, and we all know that small mistakes in accounting can lead to grave consequences.
So how can we make sure that small mistakes are not overlooked in accounting? The first step in addressing any problem is to identify what causes it. Here are four accounting mistakes that small-and-medium-sized enterprises (SMEs) should be wary of.
No. 1 Not keeping records
The most common mistake is not keeping records of your business finances. It is important to run the numbers regularlyand to keep the records in a safe and secure place.
There are also SMEs that may already be keeping recordsbut are doing so sloppily. Numbers may be written only in a notebook, and receipts are collected but not sorted.
A quick solution is to use easy accounting and recording tools that are online, so they are easily accessible. Receipts may even be stored digitally just by taking a picture of them.
No. 2 Not fixing inaccuracies at the outset
It is easy to ignore small inaccuracies during record-keeping, but keep in mind that these will add up later on. If this happens, the inaccuracy will be larger and will be harder to deal with.
It is a good rule of thumb to investigate the issue the moment it comes up.
No. 3 Not balancing bank accounts and cash records
When there is a discrepancy between bank accounts and cash records in an SME’s account, trouble is usually brewing. Inconsistencies in the book are never good for any business. For that reason, it is crucial to actively reconcile bank accounts and cash records. Relying on the accounting software to do all that work is not advisable, too, since the software could not always crunch in the numbers. Keen attention is needed to ensure that all expenses are correctly recorded in business accounts.
Inconsistencies in financial records and lack of proof to support documents may count as deliberate fraud when scrutinized by legal eyes, so SMEs should always prioritize reconciling their bank accounts and cash records.
No. 4 Not consulting an accounting professional
It is also common for owners of SMEs to balance their own books, even though they do not have accounting knowledge. Because of this, small and common mistakes are not identified easily, and this leads to larger issues later on.
Failure to consult a professional may come from the assumption that consulting accounting professionals is expensive. However, there are less expensive options available. There are even accounting professionals that list their services on freelancing websites. All SME owners need to do is to choose the right one.
It’s easy to commit mistakes, but it’s never easy to rectify them. Businesses, specifically SMEs, must take a systematic approach to accounting so that even the smallest of errors will be prevented. In accounting, accuracy and precision is the only way to perfection. (PA, MC)