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Bookkeeping Mistakes for Small Business

Posted on 24/01/2024

Bookkeeping Mistakes Made by Small Businesses:

Operating Without a Budget

I regard unplanned spending as one of the worst startup blunders, thus you need a budget. I know, nobody likes “BUDGET.” It sounds restricting, dull, and unfun! You worked hard for your money—why not spend it whatever you want?

Yes, you can spend your money whatever you wish. But guess what? A budget allows that!

Have you ever acquired a better job and splurged on something, only to struggle to pay your taxes a few months later? Budgeting helps you prevent impulsive spending and make money work for you and your business.

Pro Tip 1: Stop thinking budgeting is restrictive and enjoy the benefits of not spending all your money on unnecessary items.

Ignoring cash flow

Cash flow drives your business. Restful sleep and business delight depend on knowing when and how much money goes in and out. Many business owners disregard cash flow, causing problems.

Creating a cash flow monitoring system is one of the best things you can do for your organisation. It may not be the most exciting part of owning a business, but you can’t disregard it.

Pro Tip 2: Monitor cash flow, expenses, sales, accounts receivable, and other deficits to stay on top.

Related Topic: Common Bookkeeping Mistakes: How to Avoid Them

Not Making Any Plans for Wet Days

Like your personal finances, you must save for a rainy day. You never know when extra cash will rescue the day, from recessions and pandemics to equipment failures and unforeseen repairs.

Business savings accounts should be opened ASAP. Slowly create a business-boosting reserve. The easiest solution is to automatically transfer a certain amount from your running account to your business savings account weekly or monthly. So, if the unexpected happens, you’ll be financially prepared.

Some are better than none, but you can always add or subtract.

Read More: Bookkeeping for Small Bussiness 

Early Large Purchases in Business

Buying bright business supplies might be tempting, especially at first. Social media might make us think we need the latest gadget to succeed. Sometimes you need that widget, but most of the time you can use what you have.

Consider your purchases carefully, especially when cash flow is restricted. Always consider whether a big purchase can strategically build your business and increase income or just be cool.

Pro Tip 4: Consider the three faults above when deciding whether to buy or invest. To make the best selection while buying pricey business equipment, ask yourself these questions:

  • Did you budget for this purchase? If not, can you schedule it soon?
  • How would purchasing this item now impact your cash flow? What about waiting a month, quarter, or year?
  • Will this purchase hinder your savings account contributions?
  • Will this purchase save important time or money immediately?

Avoid These Common Mistakes

A single financial misstep can sink your firm. Following the recommendations above will help you avoid these financial pitfalls and grow your business! It requires considerable forethought and even professional help.

Our Bookkeeping Experts are here to help.

Topics: Tech Tips




About the Author:

Pramod has over 11 years of experience relating to finance and accounts in diversified industries. He is an expert in resource and process optimization resulting in greater operational efficiencies.

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