Accounting mistakes are one of the most common yet easily avoidable business pitfalls. You need accurate numbers to make sound financial decisions, and if your accounting is off by even a few dollars, you may find yourself in the red instead of the black. But don’t worry – here’s a list of 7 common accounting mistakes that put your business at risk, and how to avoid them.
Not implementing an accounting system
When it comes to running a business, having an organised accounting system is essential. Not having any kind of system in place can make it difficult (or impossible) to track expenses, manage payroll, or know how much money is coming in and out.
The solution? Take advantage of modern technology – there are plenty of affordable accounting software programs available that make it easy to keep track of all your financial data.
Relying on social media for tax advice
When it comes to taxes, everyone has an opinion – but not all opinions should be trusted! Making decisions based on unsound advice from social media can lead to costly mistakes that could put your business at risk. Instead, seek advice from a qualified tax professional who understands the specifics of your situation and can provide tailored advice for you.
Taking personal finances into account when dealing with business finances
It can be tempting to use personal funds when starting up a new business or covering unexpected costs, but mixing business and personal finances can lead to major headaches down the road if not managed properly.
The solution? Open up a separate bank account for your business so you have clear documentation on what is being used for business expenses and what is not. This will also help you keep better track of cash flow and plan for future expenses more accurately since everything will be in one place.
Failing to understand how, when, or why business taxes need to be paid
Taxes are often seen as a necessary evil that many entrepreneurs would rather ignore than tackle head-on – but ignorance isn’t bliss when it comes to taxes! Educate yourself on when taxes need to be paid (quarterly vs annually), which taxes need to be paid (income tax vs sales tax) and why they need to be paid (for both federal and state governments). Additionally, take time each year to review your tax return so that you understand where every dollar goes.
Failing to keep proper records
Maintaining good records is key when it comes to managing taxes correctly as well as keeping track of expenses throughout the year. In order for this process not to become overwhelming make sure you set up some kind of filing system with clearly labeled documents that are easy to find whenever needed – this way nothing slips through the cracks!
Failing to save for business taxes
Nobody likes paying taxes – but it’s essential for businesses! To help stay ahead of them (and save yourself from any last-minute scrambling) calculate estimated taxes quarterly or monthly based on past returns and pay accordingly – this way you won’t face any surprises come October 31st! Additionally consider consulting with an accountant or tax professional who can provide tailored advice specific to your individual situation.
Ignoring changes in state and federal filing rules
Being out of date on state and federal filing rules can be a costly mistake for any business. Staying in compliance with these regulations is an essential part of running a successful operation. Failing to follow the guidelines can result in severe penalties, including steep fines and other legal consequences. Ultimately, the best way to ensure that your business remains up-to-date with its filings is by staying informed of changes or modifications to state and federal rules as they happen.
No matter what stage your business is at – whether just starting out or established – taking steps now toward avoiding costly accounting mistakes will ensure success down the line! From setting up accounting software systems that work best for you, seeking trustworthy advice from professionals, like Accounting Tax Solutions, regarding tax questions and creating processes around proper documentation – avoiding these seven common errors will help keep your business financially healthy now and into the future! By following these strategies today you’ll thank yourself tomorrow when everything runs smoothly come tax season!
Contact us today on 07 5559 1200 or email us at info@accountingtaxsolutions.com.au. Alternatively you can visit our office located at Shop 31, 3 Swan Lane, Mudgeeraba Market Shopping Centre, QLD 4213