Small businesses often strangle success in managing multiple business aspects hastily or naively. To flourish in highly competitive industries, small businesses need to give an eye to detail and accuracy. Accounting is one of the areas, in which small business owners juggle. Due to several reasons and factors, small business accounting problems rise day by day and end up in a miserable situation.
To do better than just survival, small businesses need to be on their toes or adopt the best practices in all aspects of a business. As finance and accounting is a vital part of business, the first thing to focus on and maximize efficiency is accounting and bookkeeping.
To help you and many other small businesses like you, we have collated major accounting problems that are commonly faced by small businesses to give you a clear view of the problem area. Moreover, as per our years of experience, as a leading offshore accounting company servicing businesses that require outsourced accounting and bookkeeping services, we have also SOLVED these major problems for you.
What are the common accounting problems?
1. Missing out on reliable accounting platforms
One of the major concerns of small businesses is to save funds to use in business. For that, small businesses go through various adjustments and sacrifices, and in many cases, this becomes a giant mistake.
Using manual accounting using a spreadsheet is one of the major problems in many small scaled firms. This results in small mistakes, which lead to major faults in the final accounting and tax return preparation. Even if you do not have the budget for outsourcing accounting and bookkeeping jobs, using reliable accounting software is a must.
To make sure get the right software for your business, look for the following features in it:
- Contact management
- Contact history tracking
- Invoice generation
- Balance sheet, financial, and cash flow statements
- Inventory management
- Sales tracker
- Budget planning
Use the best accounting software for your small business that fits your budget. Say adios to the manual accounting process. You can also read articles shared by the top outsourced accounting firms on how to find the best accounting software for a small business.
2. Piling up accounting and finance jobs for months
Often, small businesses have fewer clients compared to big firms with several customers. This is the reason small businesses often ignore the worth of keeping financials up to date, if not on a weekly basis, at least on a monthly basis. However, small businesses tend to put some PDFs, rough spreadsheet entries, or snapshots as accounting documents to prepare accounts on a quarterly basis. Some small businesses even make accounts on a bi-annual basis. This causes one of the serious accounting problems.
Some of the common issues faced by small businesses as per the best company that provides outsourcing bookkeeping services are listed hereunder:
- If the income statement is not updated on a regular basis, but expenses are incurred on an ongoing basis, it will show a negative balance. This may cause a bad brand reputation.
- Irregular account updates may upset the investors or put a hold on getting the required investment.
- Missing documents or mistakes in accounts may become bigger and more difficult to resolve in the long run.
You must keep your finances updated on a weekly, bi-weekly, or monthly basis. This way, you can impress investors by showing how seriously you are taking their funds and avoiding major mistakes.
3. Incorrect bookkeeping and accounts
One of the disastrous accounting problems in small businesses is wrong numbers. Having incorrect or inaccurate accounts can cause major financial losses, losing investors, or even being a victim of fraud. Incorrect numbers can also lead to sinking business as you might be under the impression that the business is making a profit while the actual thing is you are losing money and credibility.
These errors might be the result of any of the following:
- Not using a reliable accounting software
- Not using the standard bookkeeping practices
- Wrong inputs
- Missing out on some data
The reconciliation even by the best outsourcing accounting company can be challenging.
Keep your financial data up to date. Be transparent and accurate in creating accounting statements, expense statements, income statements, balance sheets, etc. Use the best accounting software and create financials on a monthly basis. Be open to using outsourcing bookkeeping services.
4. Inaccurate payroll management
Even if business payroll is a straightforward job, many major accounting problems are related to payroll. Accurate payroll management is necessary not only to keep your staff happy with on-time salaries, but also to keep your accounts clean and gain tax benefits while filing tax returns. It can also save you from debts with increasing interest. Even if there are several perks of keeping payroll management clear and transparent, small business owners make mistakes in it.
Along with client accounts, keep payroll accounting accurate and timely. You must invest time on a monthly basis to make accurate entries or perform reconciliation if needed. The best accounting software also provides the feature for accurate payroll management that you can use. If you still struggle in keeping the accuracy of payroll management, invest in professional services.
5. Mixing up personal and business accounts
One of the most common accounting problems is mixing up personal and business accounts and this happens because using the same credit card, bank account, ledger books, etc. Many business owners make the mistake of paying for small personal expenses using a business credit card. All this may sound like negligible things, but it can cause major accounting issues and can cause financial losses. You will not be able to accurately gauge the success of your business or generated profit. You will not be able to justify your expenses if you need to face an audit. Also, receiving tax benefits will become difficult with mixed up accounts.
Use separate banking accounts and cards for personal and business expenses and never cross use them. You must manage personal finances separately instead of mixing up both even if it is a very small amount.
Irregular and inaccurate accounting habits cause major accounting problems for small business owners. These issues can be overcome with more fashioned and streamlined bookkeeping and accounting practices.
The most recommended solution is to use outsourcing accounting services to let experts do the job and you continue focusing on business growth, finding investors, saving on tax, etc.
We are one of the renowned accounts and bookkeeping service providers that have helped several small businesses with reliable accounting and bookkeeping services. Contact us at +1 201-778-0509 or reach out at [email protected].