We all have heard multiple times that accounting stands as one of the core pillars of business. Keeping that in mind as the first way to success, numerous business owners and entrepreneurs hurry-up to implement the accounting foundations in their business premises. It has been noted that after implementation, slight errors are made at a later part which harms the business to a great extent. Even small negligence can cost you significant loss which needs to be understood. This article will take you through the top ten accounting errors that you need to aware of to save your business from the company liquidation phase. Let’s have a look.
1.Errors of Omission
One of the most common error that every in-house accountant deals with is the non-recording of business transactions. It turns out to be utmost important to record business records at each point a transaction has been made. Be it a purchase or sale; a file needs to exist to prove its accountability. Many at times, the recording part gets overlooked or is kept for a future date, which ultimately results in no recording.
2.Not Following the Accounting Procedures
The concept of accounting has got a certain specific set of standards, which one needs to abide by the corporate organizations. The International Financial Reporting Standards (IFRS) turns out to be a globally accepted standard issued by International Accounting Standard Boards (IASB). These principles are to be followed accordingly, and not following the same would lead to a mismatch in the company records, or we can say a proper structure doesn’t get followed.
3.Not Rectifying the Errors
Many at times the accountants figure out the several faults, but then they fail to rectify the same. This slight negligence can break your business in a much bigger way, as your records will not be updated, and you might generate business reports based on the false data. The business management needs to keep in mind, that even a minor change which has been figured out should be rectified within a specific duration.
4.Non-Maintenance of Company Receipts
Receipts or bills are expected to maintain appropriately, so that, at times, you can refer them when a need arises. Non-maintenance of the company receipts might lead to data loss, and your accounting books will ultimately be affected. In any case, if the accounting books are not updated, then the receipts will help you to trace the relevant transactions when the need arises.
5.Non-Familiar with Accounting Software
It is well-known that technology has got a firm hold on all possible business domains. The accounting domain is nowhere lacking back as the IT domain has captured the accounting market as well. Numerous software is available in the market that can help you to carry out the accounting activities in a quick way. Being ignorant about accounting software can become an obstacle to accelerate your business growth.
6.Failure to Create a Budget Plan
The word budget is used even in daily life to set a specific sum aside to carry out the necessary tasks. By this, we can understand the importance of a budget, and failing to maintain a budget professionally is a sure-shot way to deal with business loss. For every task that needs to be carried out in the company premises, a specific budget needs to be set accordingly to meet the targets. One should maintain a drafted copy of the budget preparation, and the management should keep a strict eye on achieving the required goals with the stated budget.
7.Blending Personal and Business Funds Together
You must have heard the saying, “Don’t put all eggs in one basket.” An established company has to corporate with the banking industry to deal with the banking proceedings and open a business bank account. Opening a corporate account helps you to deal with the business transactions, and hence, your holdings stand on a safer side. Blending both the funds together leads to a mess, as you will have no idea regarding the complete funds that you hold in your hand.
8.Net Profits are Considered as Cash Flows
Many at times, you might get confused regarding the profits and the cash flow generated by the business organization. It is a fact that both have to deal with the flow of money into the organization, but then, there exists a vast difference between both. If you carefully observe, net profits are considered to be the profits that are generated after making the business expenses. On the other hand, cash flow relates to the continuous movement of money into an organization. Treating them as one in the company books turns out to be an issue.
9.Taking a Longer Time to Analyze the Accounting Books
As we know that the corporate world revolves around the phrase,” Time is Money”. You need to make sure that your company’s accounting books are adequately analyzed on time. Delaying the same, or dedicating too much time on analyzing the same would kill your precious time. You need to make sure to deal with proper time management while dealing with the accounting books.
10.Not Taking the help of Professional Experts
Now, if accounting isn’t your cup of tea, you should ideally take the help of professional experts. This will not only save your time, but will also help you to pave a new way, and build new strategies to grow your business. The insights projected by the subject matter experts can help you deal with complexities since it’s they are professional in it. Holding the thought of hiring one, backed by the idea of occurring more expenses would turn out to be a complicated one, as non-implementation would lead to huge business loss. To know more as to why you need to outsource, here are the seven reasons to outsource your accounting and bookkeeping services.
Now, you have got a complete idea regarding the accounting errors that get committed in an organization. At the same time, it needs to be taken care that the accounting concepts turn out to be crucial and involves complexities. Carrying out the accounting activities by the in-house team might turn out to be an issue while assigning the same to professional expert turns out to be a smart option. JAXA Chartered Accountants is here to help you at carrying out the accounting activities in an error-free way. You can focus on your business planning while we take care of your accounting books. We stand as one of the top ten accounting firms in Dubai, who can provide you with tailored solutions according to your business needs. To have a word with our accounting experts, do contact us-we’d be glad to assist.