As a small business owner, you may find yourself pulled in multiple directions at once on a daily basis. Given the weight of your responsibilities, it can prove difficult to become an expert in all aspects of your business, but understanding how to manage your business's basic accounting needs is of particular importance.
Not only does having a firm grasp on business finance minimize the chance that you will make a costly accounting error, but it should also help you avoid attracting the attention of the Internal Revenue Service or otherwise damaging relationships with suppliers, consumers and your workforce. Given the complexity of business accounting, there are numerous errors that can be made, but some of the most common include the following.
Not knowing when to ask for help
Business accounting can be highly complicated, and it may prove particularly so when the time comes to file end-of-year taxes. While you may be resistant to asking for help when it comes to managing your pride and joy, it is also perfectly acceptable to recognize the areas where you may be better off asking for professional assistance.
Failing to save receipts
In the age of modern technology, it can be tempting to trash old paper receipts, assuming you have an electronic trail of your purchases you can always refer to if the need arises. Resist the temptation, however. While the odds of you being the subject an IRS audit are relatively slim, you should expect to have to produce physical, paper receipts if you are, in fact, audited. Without them, any marked business deductions might be considered invalid, meaning you may end up paying out far more than you expected.
Failing to stay current on reconciliations
You may also find that accounting is one of those things that falls a little lower on the priority list when you get particularly overwhelmed. Once days, weeks and even months start to tick by without an update or reconciliation, however, the odds of you making an error increase considerably.
Combining personal and small business finances
As a business owner, you may also feel the need to tap into your business accounts or credit cards for personal reasons from time to time, but doing so can have a considerable negative impact on your business. If the IRS sees, for example , football or concert tickets purchased on a company credit card again and again, you can expect that this might be considered a red flag, which in turn can increase your chances of an audit.
These are just a few of the common accounting errors today's small business owners are prone to making. For more about how to manage your small business, consider enlisting the aid of an attorney.