This past year was the first year that I was fortunate enough to work from my home. Working from my home has been a wonderful change for both personal and professional reasons. The only thing that caused a slight issue was the tax filing changes that I had to endure. The office in my home was now considered a tax deduction. I had to get some help learning how to deduct the things that are allowed on my federal taxes. If you are new to working from home and have a home office, this blog can help you learn what you need to know before tax time rolls around.
If you are a small business owner, chances are you've performed a lot of your own bookkeeping and business accounting services. A whopping 60% of small business owners feel they do not have enough financial knowledge. This can lead to stress and making unnecessary mistakes. Here are some of the most expensive accounting mistakes SBOs make and how you can avoid them.
Procrastination
The first mistake small business owners make is procrastination. Entrepreneurs wear many hats. When you are in charge of so many aspects of your business, it's easy to put things off. This creates pileup and disorganization. You stop tracking your expenditures and budgets and start cutting corners and missing income. Before you know it, you're in the red and the only way out is to hire someone. Set aside a regular interval of time to handle the business side of your business.
Not Recording Small Transactions
You can't fill a leaky bucket. The small, insignificant transactions in your business quickly add up like a single flame in a box of matches. They will burn your budget and your cash flow to the ground. A business owner should know where every dollar is going in the business, especially when transferring costs to customers. Not having a record for missing funds here and there, makes it difficult to grow your business or give investors an accurate view of how it's doing. It also doesn't look favorable if the IRS needs to confirm your income and expenses.
Not Reading Your Financial Statements
The most important financial statements to an SBO are the balance sheet, the income statement, and the statement of cash flows. Your financial statements play a vital role in keeping you updated on the health of your business. All accounting software comes with the option of printing your statements. Choose a regular time to review your reports. They summarize where your money is going, how much you are bringing in, and whether you have the money to invest in new talent or technology.
Failure to Automate or Outsource Business Accounting
The accounting industry has come a long way from file cabinets full of handwritten ledgers. By 2026, the global accounting software market is expected to reach close to $12 billion. The software has been made to function over the cloud and integrate with various other business tools. Now you can take a picture of a receipt and have its contents autofill into a form. Transactions, like creating a new customer account that used to take minutes to hours now happens in seconds. Many accountants believe that adopting technological advances in the office have increased their productivity.
Then comes the outsourcing. If your business continues to grow, you will eventually need help. Just because you can do something on your own, that doesn't mean it's wise to. Hire a professional to handle your business accounting so that you can focus on what you're best at.
Owning your own business can be stressful and fulfilling in equal measure. While making financial mistakes adds to that pressure, avoid the mistakes that are preventable. Don't wait to organize every aspect and transaction of financial data. Modern technology vastly cuts down the work that must be done. Review your records and statements regularly, and if it gets to be too time-consuming, outsource to a business accounting service.
Share30 June 2020
