2 Major Accounting Mistakes to Avoid for a Small Business

Posted on: 23 May 2022

Proper accounting and financial management are critical to a successful business. Yet the lack of appropriate accounting knowledge pushes some business owners to make mistakes that derail their growth trajectory.

Although accounting errors are bound to happen occasionally, you can avoid most of them and minimise their impact by learning about these common accounting habits that could harm your bottom line.

Mixing Personal and Business Finances

However tempting it is, refrain from using personal finances to boost business operations. You should also avoid spending business finances on your personal expenses. Separating your business and personal finances allows you to view your company as an independent entity and safeguard its finances.

Using separate accounts makes it easier to track business expenses, which makes things easier when filing taxes. Remember that every receipt counts during tax time. Incorrect filing results in non-compliance, which leaves you vulnerable to hefty fines. It would help to have business-only records to prevent mix-ups that could cost you a lot in the long run.

Furthermore, mixing business and personal accounts hinders you from enjoying things like tax deductibles. Companies are entitled to different deductibles that individual accounts don't get. Therefore, if you mix up your transaction documents, it becomes hard to determine which business expenses qualify as deductibles. You might even end up paying more money to the ATO.

Doing it Alone

It's not uncommon for small business owners to handle bookkeeping and accounting by themselves. Avoiding retainer fees to save a few dollars can be enticing, but it will cost you more than you hope to save if you don't understand everything about business accounting.

Hiring professional accountants protects you from many accounting liabilities. These experts have experience and understand the ins and outs of bookkeeping better than you do. They will sort and systemise your books to make follow-ups easier.

An organised record-keeping system makes tracking your daily, weekly, monthly and annual transactions easier. You'll know where to cut costs and what investments will give you the highest returns. 

Even better, a reliable accountant is always a trusted advisor. You can count on them to keep you up to date with the latest tax regulations. The accountant will also advise you on tips to help you minimise operational expenses and maximise revenue.

They can also file your taxes and submit the forms on time, which saves you time and the hassle of keeping up with complicated bookkeeping records. So if your business has to be audited, you can be assured that you won't be subjected to penalties for gross omissions and errors.

For more information about accounting services, contact a local company.

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Accountancy: Counting Together

Hello, my name is Stuart and I live in Sydney, Australia and this is my accountancy blog. I have always loved numbers. When I was a little kid, my granddad would sit me on his knee and make me recall the times tables. I also remember counting all the money in my piggy bank and my dad explaining the concept of compound interest to me. Although I didn't enter the accountancy trade, I still keep in close contact with the industry and like to keep up with what is going on. I hope you find this blog very useful and that it helps you to save a little money one way or another!

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