Common Small Business Accounting Mistakes

 

Small business accounting

Whether your company is a small proprietorship or a conglomerate your accounting system should be flawless and it becomes more so important when you are small because every dollar lost or wasted is your hard earned money.

It is a common mistake for small entrepreneurs to take upon themselves to attend to their own bookkeeping on the assumption that employing a professional accountant could cost a fortune but that is not the case, in fact you would be having professional eyes looking at your books instead of you.

Silent losses

For instance if there is a wasteful expenditure of US $ 100 that you are incurring every day unknowingly to you it would be US $ 3,000 per month.

If you are making a gross profit of say 10, then you will need to have an additional turnover of US $ 30,000 during the month just to cover up that wasteful expenditure, but if you have a diligent and professional accounting system in place it would detect this wasteful expenditure and ring the alarm bells.

There is also the wrong notion that when you see a gross profit margin staring at you, which you would erroneously assume to be a good deal but it would not be the case if the cost towards making that profit is greater than the gross profit you would make on it.

On the books it would be a very lucrative deal but the bottom line would be that you have incurred a loss on it without your knowledge of it.

This would be a very grave accounting mistake and if you keep on repeating such actions you would be staring down the barrel when you take stock to see where your monies have all gone.

Ignoring the gravity of accounting

Some small business owners fail to take the keeping of accounting books seriously enough and relegate it as a stepchild but this important chore is what would give the profit and loss at the end of the day.

Failing to maintain your books could spell disaster at some point of time and when you do so, it may be too late to recoup as the damage would already have been done.

There is also a very distinct difference between your employees and those who are contracted to do specific tasks to specific times, getting all of them into one category as workers doing the same tasks could spell disaster because the two are like chalk and cheese, when it comes to responsibilities of the company.

Professional services

Once you assign a professional accounting service in uae to maintain your books it becomes imperative that you share every detail about the business with him as he has taken an oath to safeguard client confidentiality hence you should not be apprehensive on that.

Only when he knows what is happening in your business that he would be able to advice and guide you and ensure that business is on the right path.

Last but not least there is a necessity to ensure that your books are reconciled with the bank account balances and you are aware where all your money is being spent, whether it is for the company or for some other purpose.

Comments

  1. IMC Group14 September 2023 at 01:57

    Thanks for sharing the excellent informative article that we should avoid common mistakes and things to take while we handle accounting services in Dubai.

    ReplyDelete

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