May 21, 2024

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Small Business and Accounting: Is Your Bookkeeping Process Screwing Up Your Business?

Accounting can help to accelerate business growth when the process is done correctly. But if you are not used to managing business finances you can put your company at risk. Let’s take a look at three common accounting blunders and how to handle them the right way.

  1. Mis-classifying transactions. Running a business solo may cause you to work in areas outside of your professional expertise. With the availability of accounting software on the market today, do-it-yourself bookkeeping is on the rise. But managing this task when you lack the proper training can do more harm than good. Lack of accounting experience increases the chance of improper transaction reporting and errors.
  2. Inconsistent reporting. Too often bookkeeping is made to be the last priority on the list of things to do. When you are busy attending to other tasks in your business it is easy to push this task to the end of year. You need consistent feedback to know what changes to make throughout the year.
  3. Using unreliable data. When it comes to generating financial reports, remember that garbage in is garbage out. In other words, your financials are only as good the data in your accounting system. In order to make the best assumptions, forecasts, and decisions you must have a system with complete information and data that is free of errors.

Now to correct the process here are some things that you can do:

  1. Learn bookkeeping basics. Managing the bookkeeping may be something that you do on your own. When transactions occur that you do not understand, get answers from the pros. Seek the advice of a bookkeeper or accountant who can review your entries at least quarterly and make any needed adjustments to the accounts.
  2. Schedule time for bookkeeping. With so much on your schedule it is easy to overlook some of your tasks. Improve management efficiency by carving out time to enter transactions. Include financial reporting and management review to your list. To save time automate as much of the process as you can with software programs and online accounting and banking tools. Be proactive and use financials regularly to determine the actions to take sooner rather than later to improve critical areas of your company.
  3. Build in checks and balances. Your financials are tools that help you keep track of business performance. If no one is tracking results, then you are playing the game for sport. It is important that the results reflect accurate transaction history. You can achieve this by using checklists for the accounting process, reminders of important tasks, and regular reviews and audits of your accounts.

As you review the accounting process what improvements will you make to capture a complete financial picture?To learn how you can clean up and organize your bookkeeping system visit http://www.tbsusa.com.