No matter the size of your business, you will face the same type of accounting challenges as everyone else. Unfortunately, small businesses and startups have a smaller margin of error than large corporations.
If you’re a small business or startup, we’ve listed some common accounting mistakes we have seen from new clients who were in the same position as you.
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Poor Budget Management
Budgeting is an essential aspect of accounting. It helps you to set business goals and manage your finances. A lack of budgeting will lead to overspending and wasted money. Take the time to write down a budget plan and compare it with your actual numbers. If you are struggling to put together a strong budgeting plan – and STICK to it – then MKS Group can step in and help. We have helped clients put together a business plan that is successful and sustainable. We call it the One-Page business plan. Call us to learn more about our one-page business plan, or click here.
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Not Separating Personal and Business Expenses
Another issue that you will have to deal with when running a small business is making the distinction between business and personal expenses. It is easy to view all of your expenses as one whole and forget the difference, but this can cause an unnecessary headache down the line. If you fail to divide them properly, you will find it harder to ensure your business is making money.
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No Accountant Input
Whether you own a big or small business, you should always have an accountant on your team. Accountants are there to give you support and help you manage the entire accounting process. Receiving input from a well-trained accountant is a vital part of your business and will allow you to move forward confidently. Having an experienced accountant in your corner will also help during tax time, as they understand all your business obligations and know how to help you legally minimise tax, while keeping your ATO compliance up to date.
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Not Maximising Tax Returns
Following on from the above section, not maximising tax returns is another common accounting mistake we see in small businesses and startups that come to us for assistance. It might be surprising, but you are eligible to make tax deductions to help your business grow. As a small business owner, you can use your business tax return to make up for expenses. Ensure that you get the maximum tax deductions and credits so your business can grow further.
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Not Using Accounting Software
In today’s world, modern business owners make use of accounting software to help clients manage their business. Our accountants live and breathe Xero accounting software and the reason is simple – we partner with the best cloud-based Accounting system for small to medium businesses. Using accounting software like Xero allows your business to run smoothly, without cluttering your mind. Xero enables you to easily record expenses and make sure you are staying within your budget as well as building a solid foundation for your accounting. Learn more about Xero accounting by clicking here.
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Not Balancing Your Books
Small business owners must keep an accurate balance of their books so they can remain in touch with their finances. Doing so will help you to stay on track and know how your business is doing. It is a crucial part of running your business effectively and efficiently. If you put a full stop to bookkeeping, your books will no longer show a clear picture of your company’s financial viability. Without accurate records, it can be difficult (or nearly impossible) to track cash flow projections and statements.
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Overstating Your Cash Flow
Cash flow is the lifeblood of your business, which means you must be able to accurately estimate it. Being able to estimate your cash flow allows you to make predictions and develop a budget. You will then be able to estimate how much of a profit you will receive and this will help you face future challenges.
Conclusion
Learning how to balance your business finances is not something that happens overnight. You need to find a system that works for you, and then manage your finances correctly. As a small business owner, it can be challenging to stay on track, but steering clear of the pitfalls listed above will give you better chances to succeed.
Give your business a solid accounting foundation with the help of some of the best Xero cloud accountants in Australia (In fact we are ranked in the top 2% of Xero accountants nationwide). We provide accounting and bookkeeping services specifically focused on helping you scale and grow your business.
The best part? We can help you with all 7 of the above issues, and so much more. Pick up the phone today and give us a call. (03) 9374 8400
