The Most Common Accounting Mistakes Made By Small Business Owners

Aug 2, 2021 | Accounting

a man typing into a calculator, doing accounting work

Accounting can be a complex topic for anyone, especially when it comes to tax preparation, but for small business owners, keeping on top of your finances is something that demands attention year-round. 4Corner Business Services has put together a short list of the most common mistakes that small business owners make when it comes to accounting practices. 

Delaying Bookkeeping Or Other Financial Obligations

The day-to-day operations for small business owners can be challenging. With so much responsibility resting on you, it is easy to “put off” doing something until a more convenient time. Don’t let the one thing you have decided to wait on be your bookkeeping. 

Staying on top of your financial statements is important because there are sales taxes to pay, reports to be filed, invoices to send out and of course, monthly bills that need to be paid. 

Having One Checking Account for Both Personal Use and Small Business

Did you know that one-quarter of small business owners and managers don’t have a separate bank account for their business? You may think that it’s okay to have one bank account for both, especially when a business is in its infancy, but our financial experts recommend having one personal bank account and a separate one for your business. 

Keeping your personal and business expenses separate will save you a lot of time and possible frustration when it comes time to sit down each month and pay your bills. Plus, it is wise for small business owners to track the finances of their business independently from money spent personally. 

Tip: Should you happen to pick up a few things for your office while shopping at the grocery store, pay for those items separately and keep the receipt. No matter how much or little is spent. These receipts will be important for business tax purposes or should you be audited in the future.  

Improperly Classifying Your Employees 

The use of independent contractors, consultants and freelancers has gained a lot of traction over the past few years. And at times, that can lead to confusion over who is actually on your staff and who isn’t. This is an important distinction to make for small business owners because misclassifying employees from contractors can lead to major consequences, which may include anything from tax penalties to lawsuits. Unsure how to make that decision? Ask yourself these questions:

  • What is their job?
  • How are they paid?
  • What is their relationship with your small business?

If someone is working forty hours a week (eight hours per day/five days a week), is being paid a salary, receives health benefits, consider him/her a full-time employee. However, if someone is getting paid on a project basis and isn’t getting health benefits from you, he/she should be deemed a contractor or freelance worker. Looking for more detailed information about this? 4Corner Payroll Services can help. 

Lacking Organization In Day-To-Day Operations

It is essential that your small business is organized in the day-to-day operations. It is equally important that it is organized on a large scale when assessing the past, present and future. From cash flow management to strategic business planning, being organized is one key that will help make your small business a successful one. 

Contact us today to learn more on how 4Corner Business Services can help you increase the growth of your small business.

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