Most common business accounting mistakes
May 15, 2012
No business is perfect - from start to finish, the owner of any company will eventually make some type of mistake that will cause a hiccup in a firm's success. Leaders will face many obstacles during the span of their time as business administrators, from employee gaffes to marketing snafus.
Accounting mistakes are something that can happen quite often, and they could include placing a decimal point in the wrong place or forgetting to record an expense. No one can say how such a blunder will affect a burgeoning business, though many errors can be fixed easily with the proper accounting software.
Making large purchases
When owners consult with accounting programs and see that their company is making a profit, that can often influence leaders to purchase new equipment that could benefit the business, but that is not completely necessary.
"What many business owners don't understand is that making a capital expenditure on equipment or furnishings not only depletes their cash reserve in the short term, but will come back to bite them at tax time," Franka Winchester, of Pacific West Group, told Entrepreneur Magazine.
Accounting software could also help by providing a side-by-side analysis of both profits and expenses. Using computer software rather than hand-written ledgers would enable decision-makers to access such data more easily.
A blog from small business communications provider Grasshopper explained that recording revenue before the product is delivered may be the most common mistake a business owners make. This often gives those who check revenue figures a false sense of large cash flow.
Entrepreneur gave the example of Stuart Reisch, of Transform, a storage unit creator, who recorded sales in a lump sum, though $200,000 worth of product was not delivered until January of the next year. So Reisch checked the numbers and saw that the company had a profit, he started making growth plans. In reality, the business broke even, the source said, which caused owners to scramble to fix the blunder.
No set regulations
Small business blog Fast Up Front reported that a lack of regulations can often spell disaster for a company. Should firms establish policies regarding accounting, consistency and accuracy would be assured, according to the source.
Owners could configure accounting software so that only people who have had proper training and know all of the policies for recording company figures have access to the program. This ensures compliance and could ultimately affect success positively.