Published - Mon, 31 Oct 2022
We like to think that accountants are financial experts trained not to make mistakes. However, for whatever reasons, just like others, they are humans who err too.
The good news is businesses can avoid these mistakes if handled the right way. In addition, small business owners who manage their own bookkeeping can learn a lot from them as well.
In this article, we discuss the most common mistakes accountants make and how to avoid them. So, let’s dive right in!
Attention to detail and organizational skills lie at the core of efficient accounting. The more experienced an accountant is, the more organized he/she tends to be. The challenge is how to apply one’s personal organizational techniques to various business operations?
Think of each business as a living organism. Each has its own distinct personality and tempo. Some are more organized and thus thrive on unforgiving deadlines, while others seem all over the place but perform best with tighter due dates.
Whenever we talk about accounting, most people automatically think about keeping track of receipts, small (frequently overlooked) transactions, and diligent record-keeping. Indeed, these are essential steps in the accounting process. Failing to account for these details accurately can significantly impact your estimates of actual costs and worse, inaccurate financial reports.
Flexibility is key. You need to consider various capturing and backup systems to implement. You also have to be ready to adjust deadlines and meeting sessions. At the very least, you need to sit the people down and take the time to walk them through the systems you are planning to enforce.
Meanwhile, business owners who work on their own bookkeeping should feel free to experiment between various schedules, routines, and platforms. Take note of the systems that work for you and adjust those that don’t.
Bookkeeping requires going through every little detail. It can be a very tedious routine. Thus, one needs to understand that while all items need to be recorded, not every expense has strategic importance.
Instead, try to prioritize big-ticket items during your budget review meetings. These are the ones that will require immediate attention anyway.
On the flip side, don’t ignore the small transactions as well. It can be as insignificant as that box of pens you’ve picked up on your way to the office. Regardless, it still needs to be recorded with its receipt kept. You’ll be thankful you did so in the event of a tax audit.
Take note of the high-value expenditures you want to prioritize before your budget review meeting. You can also inform the delegates about these points before the review to better prepare for it and provide more insights during the session.
It is typical for accountants or the Finance Department to be out of touch with the other business happenings in the company. It is also usual for operational staff to view them as "gatekeepers" rather than "strategic leaders." This gives accountants a one-sided perspective of the business.
It's easy to talk to the department heads, for instance, and set ideal financial milestones. Additionally, you must also consider taking the time out to see, staff-wise, if these are achievable targets.
Business owners and managers with poor financial literacy are even more prone to making such lapses of judgment.
Encourage your Finance teams to get to know the operational staff better. Break those established barriers and them also see how each department works.
More importantly, business owners, department heads, and budget handlers should be more accessible and open to criticism.
These steps can fix non-numbers-related issues that impact the company's finances in the long run and even prevent business bankruptcy.
With the further digitization of finances comes the expected advancement of financial technology. As a result, accounting software is becoming more and more powerful. The best ones can perform complex operations such as data management, creating financial projections, and producing detailed reports.
The problem is a lot of its users simply don’t know how to take advantage of such features.
The best accounting softwares out there offer free training, video demos, and other educational tools not just for the business owner but for his employees too. So take advantage of such references. It would also help to check out customer reviews and user-generated content for more tips and hacks.
Don’t limit yourself to just using a single platform. There are those specifically designed for record-keeping, while some programs are great for managing taxes. Some software even allow integration with other apps. In this way, you’ll have the opportunity to access everything from a single dashboard.
In relation to the previous tip, failing to use the available technologies to protect and back up your data is one of the most damaging (yet sadly common) accounting errors. We all want to believe that our business’ financial information is safe until it's not. Just suppose that the storage device you’re using for your business got damaged, lost, or worse, hacked into, and you don’t have a backup of it anywhere. The repercussions could be severe.
Fortunately, there are a lot of cloud backup and storage solutions available that are specifically designed for financial information. We recommend getting one with convenient import and export options, strong cybersecurity features, and various levels of accessibility.
Trusting your employees is very important. However, it shouldn’t be up to the extent of giving them full access to your financial transactions. This is probably the only strength of being both the business owner and your own bookkeeper.
Even if you’re going to require the assistance of an accountant, you should still review your financial statements thoroughly. Request the images of canceled checks if you need to. We also advise against making your bookkeeper the same person who makes your deposits.
Lastly, avoid signing legal authority for your employees to access and make changes in your business bank accounts.
While not completely, these practices can significantly reduce the risk of fraud.
Finally, once you have completed your monthly accounting sessions, then it’s time to go back to check and counter-check all your statements and make sure that your records reflect the same numbers in your bank accounts.
If there’s even a small error, it will require your immediate attention. This will prevent it from rippling into a bigger issue in the future.
Make some time to review your business bank accounts against your records regularly. This will not only help you catch erroneous entries and inaccurate records faster, but it will also prevent fraudulent activity from going undetected.
It doesn’t matter whether your accounting error is as simple as forgetting to record the thank-you gift you sent your client last month or whether it’s as significant as getting your hard drive wiped out. Regardless, their future consequences can put your business at risk.
Utilizing accounting software and other digital tools can help in data management, analysis, and report creation. Finally, well-placed safety and precautionary measures will minimize the loss of data and fraud.
By keeping the tips we have shared with you in mind, we are confident that you’ll be able to avoid even the most common accounting errors with ease. Good luck!
Mon, 31 Oct 2022
Mon, 31 Oct 2022
Mon, 31 Oct 2022