Unfortunately, in the world of start-ups and small businesses, efficient and proper accounting systems are often not seen as a must-have. While everyone knows that an ideal company infrastructure includes a robust back office, resources are often focused on the areas that generate profit. There is one problem with this – often areas that may not seem to be direct revenue generators can still have an impact on your company’s bottom line.
In practice, a business that doesn’t use reliable accounting services can experience some real pain, often in the form of missed income or losses that should have been accounted for. Here are some common accounting problems faced by SMB’s who try to operate without proper bookkeeping services in place.
1. Relying Too Heavily on an Accounting Software
Most accounting errors and small oversights can be easily spotted and amended by reviewing small business financial statements. However, most small businesses don’t catch them because they are too dependent on their accounting software. Even small businesses need to perform regular internal checks to make sure accounting errors are caught in time. The sooner the business realizes that all errors cannot be detected by accounting software, the more likely you’ll be able to prevent or reverse the errors.
2. Not Being Aware of Your Business’s Financial Well-being
As a business owner, it is imperative that you are always aware of the financial health of your business, whether you manage or own books or you have hired a financial statement service. In order to do this, you need a basic understanding of bookkeeping and accounting services, as well as how to calculate your business’s financial health. If you don’t understand the numbers, you’ll not be able to make smart and informed decisions. This is intricate work and should be left to the professionals. Professionals who provide accounting services are familiar with small business financial statements and are capable enough to give an accurate figure.
3. Forgetting to Save Financial Records
Another major problem faced by small businesses is that they forget to save financial records. It’s not their fault, there is a large amount of data that needs to be stored, and it should be in a readable format, that is not always known to business owners. But, what you need to understand is that it is of utmost importance to have financial records on hand for your business if being audited by the CRA. The CRA can audit your return and ask for any financial data, including small business financial statements. And, if you don’t have them handy, you may be in trouble. So, as a rule of thumb, your business should always maintain records pertaining to your earning as well as deductions for a minimum of seven years to protect your business during an audit.
4. Not Referencing Your Business’s Financial Health
Even if you are maintaining and operating your business’s accounting and bookkeeping perfectly, it won’t matter if you don’t pay attention to what the numbers are telling you. Successful business owners don’t make hasty decisions. They analyze their business’s current financial position and use that to derive the next steps. They also assign specific budgets to every new project they invest in after a careful analysis of the returns. Without taking these steps, it is easy for a business to spend too much money on software or project that is going to cost way more than it is going to return. So, before making a decision, sit with your accountant or bookkeeping service, and talk your numbers through.
5. Updating Costs and Income Infrequently
When you put off recording business transactions, it is easy for errors and miscalculations to find their way in. It’s also how minuscule transactions get forgotten. No matter what the income or expense is, you should record it as soon as it occurs in order to prevent unrecorded financial data. This can result in the unmatched balance sheet, and if you are from a finance background, you know what a disaster it can be. So, make a habit of not letting anything go unchecked, and record every single business transaction as and when it occurs. This further helps in the preparation of accurate small business financial statements.
Bottom Line
Being aware of these common accounting problems can allow you to avoid problems. You can immediately help your business avoid misplaced, lost, and deleted financial data by backing up your records regularly. Most of these challenges can be faced by simply hiring a financial statement service or bookkeeping service who can take this task off your hands. Recording, maintaining and updating financial data takes serious dedication and careful analysis. This is a job best left to professionals, so hire accounting or bookkeeping services and stop worrying about dealing with these challenges on your own.
