Do you know the most common accounting problems killing small business growth today?
Are you a small business owner? Do you want your organization to do far more than survive? Do you want your small business to thrive? The most common accounting problems killing small business growth are actually obvious. Unfortunately, many business owners overlook important details.
The details of accounting are neither sexy nor fun, and most business owners don’t have the training or background necessary for this vital area of operations. To help make sure that you’re doing everything you can to maximize your profitability and fiscal responsibility, here’s a list of the six common accounting problems killing small business growth. By addressing each these, you’ll go a long way toward assuring your business’ success and growth.
1. Not Using Accounting Software
There are a lot of benefits to using accounting software. Sadly, some small business owners try to do all of the calculations by hand. What’s scary is they are at risk for making a small mistake that may lead to a giant headache. There is a great selection of software available. At first, it may feel overwhelming when you begin doing the research. However, take your time, read reviews and look for something with a platform design that meets the needs of your particular type of business. The end result will be satisfaction. When you’re not sure what to look for, use this checklist of minimum requirements:
- Sales tracking
- Financial statements, cash flow statements and balance sheet
- Generating Invoices
- Contacts management and contact history tracking
- Budget planning
- Account to accept credit card payments
- Inventory management
- Payrolls
- Taxation
2. Not Knowing How to Use the Software That You Have
Next, another common mistake that small business owners make in terms of accounting is also about accounting software. That is, it’s having the software in-house but not using it, at least, not using it the right way, or not really knowing how to use it. You invest in accounting software and then you don’t actually use it. And, when you’re not using your software the right way, you open yourself up to making accounting mistakes. So, you end up taking far too much time on bookkeeping tasks that it could do for you quickly and efficiently. Most of the packages available come with tutorials. However, when you need help, contact an accounting professional and ask them to run through bookkeeping basics with you so that you can use it to its best benefit.
3. Failing to Produce Monthly Financial Reports
Failing to generate monthly financial reports is the third of the accounting problems killing small business growth! A lot of small businesses tend to minimize the importance of financial reports. Yet, they reveal the financial health and wellness of the organization. Also, avoid that mentality that producing some snapshot every few months or even twice a year, is good enough. The truth is that when you have financial backers, having a monthly report is an essential tool for them. Oh, and, what about securing an additional investment in your business? The financial statements are a sign that you’re taking their investment seriously. The more closely you monitor your company’s financial activities, the faster you can pick up on issues as they develop. This includes slow-paying clients, an oversight in your accounts payable, and more.
4. Having the Numbers, But They’re Wrong
There are a lot of things that can lead to your financials being incorrect. These are not using accounting software (or not using it correctly); failing to update data; inputting incorrect data; and more. Whatever the cause, the result is never good and can cause problems significant enough to close your business or scare investors away. Worse, it can leave you vulnerable to bad actors who can use the inaccuracy to perpetrate fraud.
5. Mixing Your Personal Accounts with Your Business Accounts
Even when you operate a pass-through business, you must keep separate books. This includes separate credit cards and separate banking for your personal needs and your business needs. Failing to do this will make it nearly impossible to determine what expenses are deductible, what capital investments generate profit and more. Thus, small oversights are more likely to occur in accounting for out-of-pocket expenses, and this generally leads to paying more in taxes than you need to. Worse, if you face an audit, it will lead to a nightmare of having to separate and justify accounting measures that have been taken.
6. Failure to Properly Manage Your Payroll
Payroll is one of the most complex areas of running a business and you always want to make sure you that you’re paying your employees correct. However, you need to be certain that essential areas like payroll taxes and withholding are being done accurately. When in doubt, it makes sense to bring in outside professionals for assistance.
Do you struggle with any of these accounting problems killing small business growth?
Recognizing these accounting problems killing small business growth is vital. Call Alex Franch, BS EA at 781-849-7200 or email us at contactus@worthtax.com and ask for me, Alex Franch, BS EA. With tax season almost here, we encourage you to set up your appointment today! We are also offering a variety of client discounts to save you money.
Alex Franch, BS EA
Alex is a Tax Specialist and Partner at Joseph Cahill & Associates / WorthTax. He has a diverse background including a Bachelor of Science from Boston College in Mathematics and extensive military service. Alex is an Enrolled Agent and has a decade of tax preparation experience. He is passionate about serving businesses with tax and financial planning.
Sources and Resources
- Why is Getting the W-4 Right So Important?
- Form 1099 Miscellaneous Filing Deadline
- IRS Tax Guidance: S Corporation Stockholder, Reasonable Compensation
- 12 Common Tax Problems to Avoid
- Tax Reform is Confusing Part 2
- Tax Reform is Confusing! Here is a Side by Side Comparison Part 1
- Learn About This Year-End Tax Strategy
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- Charitable Contribution: Tax Plan for Potential IRA-to-Charity Provision
- Home Office Tax Deduction Good or Bad?
- 529 Plan: Higher Education, Learning the Hard Way
- Minimizing Tax on Social Security Benefits
- Employee Business Expenses: Tax Reform Suspends Tax Deduction
- Preparing Taxes for 2018 and Beyond
