Reviewing your financial paperwork throughout the year will help you ensure your records are accurate and organized. Proper management also enables you to spot issues and resolve them before they grow and become a major headache for your operations.

Here are four of the most common accounting mistakes made by small businesses, along with some tips on how to avoid them.

1. Manage cash flow

  • Analyze your bills carefully to find any possible issues with spending. Ordering what you need is essential, but don’t keep an overstock of supplies or pay for underutilized services.
  • Update your expenses to make sure they are current. This will help you manage your monthly budget and avoid overdrafts on your accounts.
  • Follow up with clients to make sure invoices are paid promptly. Prompt payments keep revenue flowing in on a regular basis.
  • Don’t spend based on revenue amounts from a new contract. Delays and other problems may increase costs and reduce the amount of revenue you actually bring in.

2. Keep an emergency fund to cover unexpected expenses

You can’t always predict when a big, costly problem will arise. But you can monitor operations and watch the trends in your industry to stay current with potential problems. Having a sizable emergency fund means you will be ready if something does come up and won’t need to worry about being short on funds.

3. Report finances properly

Keep track of all financial transactions, big and small. Accurate records are vital to a company’s survival, and reconciling your books monthly (or even more often) gives you a regular snapshot of how your business is performing. That way, you can make adjustments to spending and operations when necessary to keep things moving in a positive direction.

Local and federal regulations require specific financial disclosures. That’s why it’s important to stay in close communication with Root Tax so that we can guide you in how to report your financials accurately and on-time.

4. Regulate payroll

Managing accurate records of your employee salaries and benefits are extremely important. Errors could cost you big in government penalties. Company employees and independent contractors utilized by the company should be classified differently for tax purposes.

Employee salaries and benefits should also be documented and tracked properly. This includes their benefits and paid time off.

The staff at Root Tax can help you avoid these costly mistakes. We will answer any questions you may have about regulatory requirements on your financial records and work with you to ensure the financial side of your business runs smoothly. Reach out to us at any time.