Accounting pitfalls all new small businesses should avoid
When you start a small business, you are faced with several challenges. In fact, these challenges start long before the business even opens its doors. All of the planning, sourcing and accounting considerations that need to be made can take months, if not years, to craft and finalise.
Considering all of the work that goes into starting a business, it would seem a pity to let it all crumble because of accounting pitfalls. Below, you will find some of the most common ones - if you’re a small business owner, be on the look-out for any signs of the following:
Not checking the books
A small business’s accounting needs to be done as often as possible, especially when it’s in its infancy. You need to keep abreast of everything happening in your business so that you know exactly which areas need more focus. Things can get pretty busy when a business first starts and checking the books may seem like a tedious job, so it may be wise to invest in accounting software, as it is sure to make life a lot easier for you.
Not hiring professionals
It’s incredibly important to get the right people for each respective job, even if it means having to invest more in salaries. While you, as a business owner, want to make sure that everything runs smoothly, you may not be able to complete certain tasks. For example, if you are not a trained accountant, you should definitely either hire a permanent accountant or outsource to an accounting firm. With something as intricate as accounting, you need a professional on the job.
Not separating personal and business accounts
All small business owners have a natural need to nurture and protect their business - it’s only normal. However, it is important to separate business accounts and personal ones. This gives you a much better and more realistic view of how well your business is doing. However, bank charges on business accounts can often be fairly high. Instead of going to a bank at first, consider options such as SnapScan and PayPal until your business starts drawing a profit, as their fees are generally lower.
Not getting the right credit
Not many people can start a business without needing to obtain some kind of credit and most automatically think that the bank is the only viable option. This might not actually be the best option for your specific business though. For example, if your idea is a start-up that is driven to create jobs for others, you may just be able to source the money, or at least a portion of it, from something like crowd-funding. Do some research and make sure that the way in which you’re receiving funding is the best option for your business – you don’t want to end up spending years paying off unnecessary interest.
The key to maintaining good business accounting is to be vigilant with your small business. Hopefully, the points listed above will give you good insight into how to make sure that your business’s accounting is always accurate and up-to-date.