If you run your own accounting company or department, some common mistakes are essential to avoid. We describe some of the biggies below so you can avoid trouble. And remember to earn your CMA designation because it will arm you with skills and knowledge to avoid many critical accounting errors.
Accurate bookkeeping requires outstanding organization skills. You’ll need to record each transaction, store receipts in paper or digital form to refer to in the future, determine taxes owed, and more.
If you fail to track and store this critical information, you’ll probably lose track of a receipt or transaction, which can spell trouble when tax season arrives.
Not Following A Budget
It’s essential to devise a budget, so there’s a baseline to check your company’s operating results. Budgets can stop overspending and also are useful for setting up your financial objectives. Your budget should be reality-based, but you also can use it to establish financial goals, whether it’s to reduce costs or boost revenue.
Data Entry Mistakes
Everyone makes data entry errors from time to time. You cannot prevent all of them, but you should perform reconciliations regularly to make sure any mistakes are caught quickly and corrected. Also, review unusual transactions and make sure there were no mistakes in data entry.
Failing To Follow An Accounting Schedule
With all your other responsibilities, keeping your books updated might not be a priority. But it’s vital to establish a schedule to write down your regular income and expenses. It’s best to update your books every day but aim for at least weekly.
Not Reconciling Accounts
When you record cash flow and related financial data in your accounting software, you should go back and check that your bank account has the same balance. If you find any discrepancies, you probably have an error that needs attention to keep the problem from getting worse.
Reviewing your bank account against your accounting books helps catch fraudulent activity, too.
Not Paying Attention to Small Transactions
It’s easy not to remember that thank-you present you gave a client or a case of printer paper you bought last week. No matter how small the transactions are, it’s vital to write them down and get a receipt. If you are ever audited, you’ll need to show the IRS all business expenses, even the little ones.
Failing To Back Up Your Data
Can you imagine the horror if the electronic device you have your company’s financial data on was stolen, and you didn’t have a backup? These disasters can strike any time, and you need a disaster recovery plan for your financial data. The good news is there are plenty of backup options out there that let you keep an updated copy of your financials.
No Accounting Software
If you track finances in Excel or an old-fashioned ledger, you should think about using accounting software. Buying the right software can help avoid mistakes and make it easier for you to handle your company’s finances.
Most popular accounting software works with your bank account, so you don’t have to key everything in. These programs simplify backing up data if a crisis strikes. If you use outside accounting help, having the appropriate software ensures your extra accounting staff has the data needed to manage your taxes, payroll, and books.
Whether you’re handling all your accounting or using other accountants to help you, making mistakes with your books can cause big headaches. It’s wise to prevent these problems from cropping up by following these simple best practices.