No matter how right-brained, small business owners must become familiar with accounting practices and procedures. From payroll taxes to direct deposit, keeping the cash flowing can determine whether a business survives. Good cash management also allows you to reduce overhead costs and gives your employees easier access to their paychecks. Online banking services have made the process much easier for business owners these days, keeping information all in one place, allowing quick transfer of funds and the availability of real-time balance information at any time and on any device.
Still, there are plenty of common mistakes that small business owners make over and over again. Don’t let bad accounting practices be your downfall. It’s always a good idea to call in the experts, especially when it comes to finances.
- Falling Behind
We realize time is of the essence when running a small business, but accurate financial statements are key to making good decisions. If you don’t have up-to-date information on expenses and profit, then you run the risk of spending money you don’t have. It’s also important to keep employees, suppliers and other people you deal with happy by paying invoices accurately and on time.
- Mixing Business with Personal
Business and personal accounts should be kept separate, as should expenses. This will make things easier (and more legal) come tax time and also help you keep track of actual profits and losses. With this information in mind, you may want to reinvest in your business rather than take your family on vacation.
- Not Keeping Receipts
With the ability to digitize receipts, it’s now easier than ever to maintain and organize them. You’ll need them as a backup for accounting records and for deduction opportunities at tax time. A good practice is to only use your business bank or credit card for business expenses so you’ll have a clear record of them.
- Numbers Not Adding Up
Even when using accounting software or programs, math mistakes can happen. Not double checking your numbers and records can lead to much bigger problems down the road, as those mistakes will compound and throw your business off track. Try to check your books and accounts monthly for accuracy and to ensure that mistakes don’t linger on.
- Hiring the Wrong Person
We definitely advocate for getting help when it comes to accounting, but choosing the wrong person for that job can be disastrous. A family member, spouse or even yourself is not always the answer. The person you hire needs to have experience, specifically when it comes to invoicing, classifying expenses and following tax laws. The right person can help you avoid errors and grow your business, while the wrong person could cost you more money.
- Only Focusing on the Short Term
The future of your business is what’s important. Accounting is about forecasting future growth and identifying financial risk. A sound accounting system can help ensure that your business is still around in five or 10 years and hopefully poised for success.
MidSouth Bank offers a full line of business banking services that include checking and savings accounts, business loans, cash management tools and even equipment leasing and insurance premium financing. Visit www.midsouthbank.com/bus-banking for more information.