As we always say, Accounting is called the language of business. This is a statement of fact not a mere say. Without the quality accounting information, it is very difficult to take operational and strategic business decisions. The growth and sustainability of a business is hampered if there is operational inefficiency and taking inappropriate decision. Neglecting where costs can be saved means you need to work on accounting practices that boast your profits to still be in business.
The rule is to first identify those poor accounting practices and undertake necessary adjustments to address the problem. You really need to take charge of your business.
Poor Organization of Your Accounting System
Here, your main objective is to monitor the flow of your accounting system. Organization is the key to save your business from terrible costs and waste of capital. Organizing the system starts from your accountant who can evaluate the process in place and make necessary improvements to monitor your books. Most business owners make the common mistake of neglecting the role of an accountant in their business growth efforts.
Inadequate Tracking of All Financial Transactions
All business transactions that result to revenue, expenses, assets and liabilities, and subsequent net assets must be recorded and tracked accordingly. Standard definition in the classification of these items is critical for adequate representation during reporting, this is where your accountant is mostly needed. Most business owners attempt to track business transactions with no error proof system in place for tracking and even when there is one, they are not sure the tracking need of certain transactions. If you aren’t sure what to track, get advice from an accountant.
Failure to Save Receipts and Document
Receipts and document are evidence that transactions were for the business, without which you cannot have adequate prove for those business transactions in the nearest future. Keep your receipts and document as long as reasonable. In most cases, you hold unto them for as many as 7 years, for your accountant to know your business transaction history especially your tax history.
Commingling Personal and Business Finances
This is common with small-business. Most Small business owners don’t keep business finances separate from their personal finances . Sometimes, this happens simply because the business grows organically, but other times the business owner does it intentionally because the believe, which is not the case, that the funds are all going “to the same place”. Commingling funds makes it very difficult to track where money is going, and even harder to make sense of things if the IRS audits you. Keep a separate business account for all business related transactions.
Other Poor Accounting Practices include;
- Not Filing Taxes Returns on Time
- Failure to Track Labor and Not Paying Employees Accurately and on a Consistent Cycle
- Neglecting Monthly Bank Reconciliation Bank Accounts, etc.
Get Accounting Help if You Need It
The benefits of following sound accounting practices seep into every area of your business. If you’re struggling to follow them, whether because finances are overwhelming, you’re too busy running your business, or for any other reason, don’t hesitate to ask for help. At Fritnoble Consulting, we offer customized plans that can help you get organized, manage all your finances, or just provide assistance as you need it. Contact us today and let us know how we can help!