Accounting for Small Businesses: Common Mistakes to Avoid

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As a small business owner, you are likely to find yourself at a place where you have to take care of most of the functions of your business. While this is possible, there are certain functions that require outsourcing professionals to help you. One such function is accounting.

The truth is you need to get your accounts in order so that you are not caught on the wrong side of the law. Besides, by keeping a record of your accounts you are able to tell whether the business is making profits or losses by looking at the numbers.

Even then, you must take caution when engaging London accountants. Here are some of the common mistakes you must avoid when outsourcing accounting services:

  • Choosing the wrong accountant – It is likely that you are trying so hard to minimize your businesses’ expenses. This pressure may be so much so that you want to compromise and hire an account simply because they are cheap while overlooking their qualifications especially with regard to their understanding of your business. Overall, a good accountant will add value to your business by helping you to minimize taxes and expenses while maximizing profits.
  • Misrepresenting your financial affairs – Sometimes the temptation to present a false impression of your account may be strong especially when you are looking to secure a loan. You must refrain from falling into this trap because when discovered it could have a negative impact on your business in that the bank may recall the loan or be subject to penalties in the case of taxes.
  • Do not use money that is meant for taxes – If you find yourself in a tight position financially, you may want to borrow money that you have set aside for taxes to sort out your accounts. While this may seem like a normal move, it is a bad mistake. Failure to pay taxes can have a serious implication on your business such as being blacklisted. This can hound you for the rest of your life.
  • Lack of clear accounting policies and procedures – While you do not need to write a book, you will do well to have a set of procedures and policies that guide your business accounting. This is crucial as it makes life easier. You can ask your accountant to help you come up with the procedures and policies.
  • Lack of proper accounting software – Getting the right software for your accounts is a good investment. It will save you the headache of maintaining your accounts so that you do not make silly mistakes with your books. Besides, it goes a long way in making the work easier for your accountant.
  • Failure to create backups – Although it seems obvious, you will be surprised that not so many people are keen on creating a backup for their accounting data. Having a backup is crucial because in the event that your data is wiped out.

Accounting is a core function in any business. Therefore, you must ensure that you get it right from the beginning. This is a sure way of ensuring that your business grows without hiccups that you could have easily avoided.

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