Top 10 easy accounting mistakes to make
Last Modified 16th of February 2021
Few people can consider themselves professionals when it comes to accounting but really, accounting isn’t all that hard. By avoiding the common mistakes people make, you can save your business a whole lot of trouble. Here are the top ten easy mistakes that workers and business owners make:
1. Paying bills too early
You should pay your bills only when they’re due. You never know when you might need some extra money and by paying bills later, it improves your company’s cash flow.
2. Setting a price too low
Before you mark the price of the item you are selling, know its original cost and the profit you want to make. If the first price you set is too low, then you run the risk of losing money on each and every following sale.
3. Not keeping a back-up of information
Everyone assumes that data is safe with the high-tech desktops and notebooks they use these days, but once your PC crashes it’s already too late. Every system has holes no matter how professional and advanced it is, so keep a copy of your data just in case.
4. Dealing with non-payers
Sometimes your customers will have no intention of paying. If this happens, you need to create a step by step process to get your money back. Better yet, spend some time to develop good relationships with your customers.
5. Making transfers using the wrong method or between inappropriate funds
This causes over/understating expenses and usually extra fees for transfers have to be paid.
6. Unapplied vendor credits
Even though it may sound silly, paying twice is a common problem especially when a company/business has a large number of vendors or more than one person involved with the accounting function. Make sure you check for open credits before paying vendor invoices.
7. Not using a budget
Many small business owners think that they spend their money carefully by watching their every pound. They consider whether the expenditure is worthwhile and by doing this for every single item, they think they don’t need a budget. This is a serious mistake because they don’t know if they’re overspending in one category and have no idea which category to invest a surplus in. You need a budget to understand the progress of your business!
8. Incorrectly classifying expenses
Picking the wrong expense description or not classifying an expense altogether can mean that the reports you come up with don’t show what’s actually happening in your business. You can solve this problem by using an efficient accounting software system that classifies expenses for you automatically.
9. Not accepting debit or credit cards
Even if shoppers and clients may forget to keep extra cash in their wallets, they never leave their debit card behind. Not accepting debit cards because it may cost you a few extra fees is also costing you valuable customers. Once again, it is a good idea to use accounting software because they offer debit and credit card processing over the internet.
10. Not keeping accurate records
It is important that you use accounting software or a simple set of paper books to make diary notes of the time, date and the name of individuals you speak with about important business issues. There is a limit as to how much you can remember in your head, and it becomes easy to forget important dates and meetings.