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Help Your Company Prevent Serious Accounting Mistakes

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Many small companies and businesses are vulnerable in their early years. After all, they’re still finding their footing in the market, accumulating customers and clients, and generally trying to get settled for the long haul. Given this, they should be extra careful when it comes to their finance documentation. Experts say that accounting mistakes can cause great damage to a small business. There are some very common accounting mistakes that small businesses make and it's important that they should be avoided.

Mistake 1: Neglecting to keep track of receivables

Make sure to monitor receivables. Whenever an employee makes an invoice, a receivable is recorded. A receivable refers to the amount of money that must be paid by the customer. Every time the business receives a payment from a customer, the payment should be immediately registered, and the corresponding invoice should be marked as “paid”. Many forget this simple step, and customer deposits end up being reconciled much later, such as tax time.

By then, there’ll be a mountain of payments lodged in the revenue account, but the corresponding receivables report will not be easy to make sense off. Hours and even days will then have to be spent reviewing and registering receivables, and the business can also end up overpaying on taxes or amassing multiple debts.

Make it a habit register all receivables and payments every month to save time, effort and money.

Mistake number 2: Not keeping expense receipts

Never throw out expense receipts! Avoid issues of confused taxation, accounting, and cash flow issues by keeping track of expense receipts. Avoid checking your bank account statement and end up wondering where certain withdrawals went. Small businesses frequently release money for equipment, supplies, raw materials, payments, or other management expenses. It’s important to have the actual receipts to all purchases made because they will give information about each transaction made and help prevent mistakes from cropping up in the expenses report.

Keep all vouchers for every single business transaction.

Mistake number 3: Failing to register cash expenses

Small businesses should keep up with all expenses concerning their business activities so these can be correctly subtracted from total revenue when the time comes. This will help small companies have a clearer view of their business’s actual annual profits.

Make sure to record all cash payments, and have all employees who are responsible for keeping track of purchases always ask for receipts.

Flat Planet is a virtual talent company that can provide expert bookkeeping assistance. We can provide you with the help you need so you can keep track of company expenses and when payments are made for what and for whom.

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