As an accounting major in college, I quickly learned all of the complicated parts of the accounting cycle. I discovered how to input the details of business transactions into a computerized accounting system. At the end of an accounting cycle, such as a month, I became experienced with calculating the revenue for the period. If you’re starting a new business, determining an accurate amount of revenue for each accounting cycle is crucial. You must know how much profit you’re making each accounting period in order to be successful in the long-term. On this blog, you will discover how an experienced accountant can help you keep track of your revenue.
An entrepreneur wears many different hats. It is important to make sure that one of those hats is making sure that the accounting for the business is done correctly and accurately. Most small business owners are not able to hire accountants because they are trying to grow their business or are barely scraping by and can't afford to pay for accounting services. As a small business owner, you will want to learn all you can about the accounting for your business. While you are learning, you will want to make sure that you avoid several of the common issues that many business owners make.
Common Accounting Mistakes
1. Not Using a Clear Accounting Method. What software are you using? Are you keeping your receipts? How often are you staying on top of the accounting? The key to good accounting is consistency. One of the mistakes that business owners make is not being consistent when it comes to accounting. Find a good software solution that can make accounting easier. Make sure that you are keeping receipts and tracking all of your expenditures. Be consistent about when and how you do the accounting. Do it once a night. Do it every Thursday. Just set a time and be consistent.
2. Do Not Mix Personal and Business Expenses. Another common mistake that is made is that business owners will often mix personal expenses and business expenses. This should not be done. One way to make sure that this does not happen is to have separate bank accounts. A bank account for your business can be used for business purchases and your personal bank account should be used for personal purchases.
3. Cash Flow vs. Profit. Another common mistake is that many small business owners have a hard time differentiating between cash flow and profit. This can doom a small business even if they are profitable. A profit is whatever remains after expenses are subtracted from revenue. Cash flow refers to the money that is flowing through the business in a given amount of time. It could be possible to be a profitable company but run out of cash. It is extremely important to have a clear understanding of these differences and know how to account for both. This will allow your business to be profitable and also have enough cash to succeed.
Understanding some of these crucial mistakes will help you and your company to succeed in the early stages of your company when you may not be able to afford a professional accountant.
For more help with accounting, contact a professional like Teri J Henderson, CPA, P.A.Share