Accounting is fundamental to all business. No matter how much you would like to stick to the interpersonal, creative side of your business, you’re always going to need to run your finances properly to function. Here are some of the most egregious accounting mistakes that new business owners tend to make.
Not Recording Every Expense
Carefully and methodically recording every expense may be a pain. It might be obnoxiously time-consuming as well. But at the end of the day, having an accurate record of your expenses will be enormously useful to you for a myriad of reasons. First of all, having an accurate expense record will help you create an accurate budget. You’ll be able to see – without exception – every business cost, ranging from insignificant to life-changing. You’ll be better able to confidently organize and plan costs for the future. And, at that special time of every year, you’ll be prepared for tax season.
Getting Taxes Wrong
Taxes are probably the most important single reason that you need to record every single expense. Messing up your taxes can result in the best-case scenario of a hefty fine, and the worst-case scenario of you in prison. Having a comprehensive record of expenses will mean you will know exactly what you need to deduct on your tax paperwork. It’s critical to get things like tax withholding right when doing payroll, and your records will help you keep that process straight. And finally, if the IRS ever decides that it’s time to audit you, you will have a complete and clean record to let them parse. Being audited when you haven’t kept your records as thoroughly as you should have can be disastrous.
Constant Planning and Budgeting
Most business owners know that they need a financial plan before opening their business. But to run as smoothly as possible, you’re going to want to keep an ongoing, updated plan that can be adjusted when you need to. Looking at your business’s current financial trends means that you can try and better understand in which direction your market and your business are headed. You can create budgets based on conclusions that you or a consulting analyst have drawn.
Good financial practices will ensure that your business avoids that worst-case scenario. Start-ups and small businesses demand a lot, after all; they can bankrupt someone who isn’t careful or lucky. All the more reason for you to put in the effort and care your business deserves.
Check out this article on how to maintain your company’s app!