Most owners understand that effective financial management is key to success, but a lack of knowledge, frustration or plain avoidance can add up to accounting mistakes that derail future growth. Protect your business and reduce your stress by avoiding these five costly errors.
1. Mixing personal and professional finances
From day one, have a separate bank account for your business income and expenses, and designate a business-only credit card. Come tax time, separate statements make submitting claimable expenses quick and easy, while reducing the risk of a painful audit.
2. Letting accounts receivable slide
It’s frighteningly easy to lose track of who has paid and who is late. Implement a strict policy and schedule: ask customers to pay at the point of purchase or within 30 days; confirm they’ve received your invoice and agree a payment date; follow up immediately when dates are missed; and keep accurate records of each client’s payment history. A cloud-based accounting solution can automate invoicing and send reminders to late payers.
3. Not using tech to track your expenses
Tired of chasing missing receipts and struggling to justify claims at tax time? There are numerous expense-tracking apps that generate easy-to-share expense reports or sync automatically with your accounting software.
4. Neglecting to strategise for long-term growth
Effective accounting means managing day-to-day finances while making provisions for future growth. Familiarise yourself with the reports your software can generate to track long-term trends, identify and mitigate risk, and find new ways to increase profitability – and talk to your accountant about which reports and metrics matter most for your business.
5. Going it alone
Owners are rarely trained accountants, so don’t try to manage your finances entirely by yourself. Collaborate with a trusted professional, invest in quality software, and spend some time familiarising yourself with the relevant tools and trends. You’ll feel empowered – and that’s the first step to a happier relationship with your business accounting.