For the owners of small-to-medium businesses, hiring their own accountant can be a little extravagant. Even though these professionals offer a very vital service to all business endeavors, the cost of keeping an accountant full-time can be prohibitive to some small business owners. Hiring a freelance accountant can offer a temporary solution, but there are time-sensitive facets of finances that could fall through if a freelancer isn’t available.
However, DIY accounting for small businesses is an acceptable method of keeping a company in the black while also staying on top of important financial matters. But entrepreneurs who would manage their own books should be wary of these common mistakes that could land their businesses in trouble.
Getting Way Over Their Head
Accounting is a complex field, with multiple areas of specialty. For example, there are different courses for oil and gas accounting and separate courses for doing internal audits. Unless a small business owner has the experience and the degree to practice accounting in a highly specialized field, they’re better off hiring someone else to do it. If their small business doesn’t require a specialized branch of accounting, they should still probably take classes to enhance their understanding of finance and taxes.
Because there’s no one whose only job is to focus on accounting, small businesses could end up with disorganized books and delayed paperwork. This is unacceptable and could lead to serious financial repercussions in the long run. People can misplace important files or forget vital deadlines and appointments, all of which can cripple a small business. Thanks to technology, many apps easily help keep and manage records.
Delaying Important Tasks
Tax season may only come once a year, but it’s crucial for a small business owner to be on top of the necessary paperwork. An entrepreneur might take it into their head that it’s OK to delay taking care of things, like invoices, but these things tend to accumulate fast.
People can forget to pay bills because of these delays, which can sour relations with another enterprise. Worse, delaying taking care of the accounts can cause people to rush when tax season comes around. This could potentially lead to mistakes when filing taxes. Such errors are among the red flags the Internal Revenue Service looks out for, which could lead to a time-consuming audit. Business owners should always set aside time just for updating and checking their company’s books. During tax season, they should allot more time to reviewing documents relevant to tax filing, to avoid committing any errors.
Accounting and running a small business are complex activities. It’s understandable that someone with so many things to do and only a little experience with accounting will drop the ball a couple of times while they figure out things. These mistakes are part of the learning experience, without which there can be no improvement. Although it’s understandable if an entrepreneur commits one of these mistakes once or twice, they should always strive to never fall victim to these common lapses again if they wish to keep their business profitable.