3 Most Common Accounting Mistakes
If you wish to run your company smoothly, then you might need to be proactive in handling common errors and remedy them immediately. By doing so, you can save a lot on time and money, and your business would have more structured operations and better clients’ satisfaction.
The following are some common accounting errors (Also see FRS 8: Accounting Policies, Changes in Accounting Estimates) that you should avoid.
Failed To Back Up Accounting Software
You should make a backup of your business data to the accounting software frequently. You can use some business accounting software that offers functions to backup your data automatically (Also see Benefits of cloud based accounting tools to a small business). Besides, you should spend some time to double-check your backup documents and run the backup files to make sure the files could be used. Sometimes, the documents saved would be corrupted. Therefore, you need to have a regular check on your backup documents to ensure you have the important documents to continue to run your business.
Doing Too Much On Your Own
Outsourcing administrative duties that do not add worth to your business might be a good idea to lessen your burden. For instance, a tax accounting professional is probably more experienced in tax law than you are (Also see What to expect from your tax agent?). Hence, outsourcing tax preparation and planning allows you to boost tax compliance, reduce tax liability and gives you more time to concentrate on activities that could generate incomes.
Most of the small company owners do not wish to entrust duty to other capable experts. However, outsourcing legal, accounting, IT and other administrative tasks could decrease errors and indirectly improve profitability.
Failed To Classify Income And Expenses Correctly
The shoebox method in accounting is most likely not a great option for small companies with only a few transactions each year. All cash enter and out from your business should be assigned to the correct category (Also see Steps to Prepare Trial Balance).
Company owners who keep on track of their accounting records would not encounter errors. This is because they understand the whole process – who was invoiced, how much and whether the consumer has paid.
As a result, when preparing your company’s income tax return before the due date, you will discover the year-end tax preparation would be smoother than attempting to reassemble the documents.
Here are the common mistakes that you should avoid when managing your business’s accounting and bookkeeping. You may engage any accounting service in Johor Bahru for more guidance.