Common Accounting Mistakes in Startups and SMEs

Startups and small businesses have a lot on their plates, and often, not enough people to do it all. Several key people might be wearing more than one hat. There’s also a good chance when things are busy, you have a reactionary approach to many administrative tasks.

With so much going on, not enough people to do it all, and less time than you’d like, it’s understandable that things might fall through the cracks. However, when it comes to accounting, mistakes can be very costly. You should try to put processes in place to limit these common accounting mistakes, and you’ll save a lot of time, money and effort fixing them later.

Data Entry Errors and Typos

Yes, we’re all human, but one of the most common accounting mistakes small businesses make is simple data entry or typo errors. Just a few seconds to double check every entry can save you a long time down the line, so make a point of double checking everything before you save and exit.

Not Keeping Up with Reconciliations

Accounting is time consuming, but it’s one of the best ways to keep an up-to-date snapshot of how your business is doing. When your books are up to date and reconciled, you can instantly see if you have cash flow or payments issues. Then you can take action to make sure you stay in the black.

Not Retaining Paperwork

Keeping receipts and invoices for tax purposes is one of the most important things you can do. If you don’t have them, you might not be able to claim those amounts on your taxes. Keep a designated pouch in every vehicle for paper receipts, and wherever possible, have them emailed to a designated email account so you always have them.

Trying to DIY Your Accounting Processes

Accounting and bookkeeping are specialized skills that take a long time to master. As a busy business owner, even with accounting software that is supposed to be “DIY friendly” there’s a good chance you’re making mistakes.

Unless you’re a micro business or solopreneur who is just starting out, you should get professional accounting help. Even if you have to outsource to a professional who charges by the hour for a few hours a week or month, you’ll get better results.

No Business Plan or Budget

No matter what people tell you, it’s always worth the time to create a business plan and budget, and to review frequently. Writing down financial goals makes it easier to make the right choices for your business.

EFT Errors

EFTs and credit cards make paying for products and services for your business easier, but there’s always a chance you might enter information incorrectly. One misplaced decimal could send a much bigger payment to your suppliers, or you might forget to hit send at all. Whether you overpay, pay the wrong person or the wrong amount, fixing these kinds of mistakes is time consuming and sometimes costly.

If possible, set up accounts so that they require dual approvals before payments can be made. An extra pair of eyes on the transaction can help to spot mistakes!

Skipping Paperwork

No one likes paperwork, but when it comes to accounting, it really does matter.

The right paperwork helps to ensure that your accountant or bookkeeper enters information in the right place, pays the right person and makes the right deposits and withdrawals. Implementing an approval system in your company also helps to ensure that only authorized transactions are processed by your admin team.

Not Investing in Accounting Software

Small businesses can get away with saving money on a lot of things. There are all sorts of ways to economize and save on various expenses. But accounting software should not be one of those ways. A good, cloud-based accounting package is an absolute game changer. If you choose on with multiple user accounts, you can even have your bookkeeper or accountant login without coming into your office — great when you’re still outsourcing!

The good news for small business owners is that there have been remarkable advances in fintech in recent years. There are software solutions for companies of all sizes, which can handle every aspect of your accounting needs. So do some research, and get your finances back on track, the easier, more secure way!