Running a business can be a challenging experience, especially when it comes to managing your numbers and staying on top of your financial management.

Unless you’ve got some experience in finance, the bookkeeping and accounting requirements can be quite daunting. Even with today’s helpful cloud accounting platforms and fintech apps, there’s always the possibility of making a simple accounting mistake.

So, what are the most common accounting mistakes made by business owners? What can you do to avoid these pitfalls and keep your finances looking healthy and in good order? 

The top five accounting mistakes to avoid

‘Doing the books’ is unlikely to be your favourite part of running a small business, but the better your accounting know-how and skills, the more oversight you have over the financial path (and success) of your company. It really can be that simple.

However, there are plenty of traps that a business owner can fall into - and a few hurdles that even the more experienced business owner may trip over from time to time. 

Here are the five most common accounting mistakes made by small business owners, with a solution and a helpful tip for further reading.

1. Mixing your personal and business finances 

When you don’t separate your personal and business transactions, this blurs the lines and makes it difficult to track your income and expenses accurately. It can also lead to personal spending being counted as business deductions, causing tax issues later on. 

Solution: Open separate business and personal bank accounts and keep them entirely separate and distinct.

Tip:  Read Profit First by Mike Michalowicz for more help with bank accounts

2. Skipping the record-keeping process

If you fail to keep receipts, log your invoices and keep proper records this can be a major problem further down the road. Detailed records are crucial for tax filing, budgeting and identifying spending trends. 

Solution: Keep digital copies of all receipts and be sure to keep your bookkeeping up to date and well-managed. 

Tip: Read our blog The ABC's of Bookkeeping

3. Miscategorising your expenses 

Throwing all your expenses under ‘miscellaneous’ makes it far harder to analyse your spending and cashflow. With every item of expenditure logged under a specific code from your Chart of Accounts, you can quickly run reports, review your spending and look at ways to improve budgets and cashflow.

Solution: Categorise your expenses properly (rent, marketing, supplies etc.) to understand where your money goes.

Tip: Read our blog Using Data to Make Better Decisions

4. Winging it when filing your taxes

Taxation is complicated and it’s easy to make costly mistakes if you’re not prepared and organised. Don't wait until tax season to sort everything out and make sure you’re aware of all your business tax liabilities.

Solution: Set aside funds for taxes throughout the year, and consider consulting Carthy Accountants to ensure you're filing correctly and taking advantage of all potential government deductions and tax incentives. 

Tip: Talk to Client Services about how we can help

5. Failing to get proper accounting advice

If managing your finances becomes overwhelming, don't be a hero. Cloud accounting software (Xero, Quickbooks etc) can automate some of the key tasks, and a bookkeeper can handle day-to-day record-keeping. 

Solution: Think about outsourcing and partnering with Carthy Accountants to get real peace of mind and improved financial management.

Tip: We are Xero Platinum Partners - Watch our short video here

Talk to us about outsourcing your key accounting tasks

You didn’t start your business to spend hours working on your bookkeeping and accounts. Why not outsource your key accounting tasks to us, and put those hours back into your business.

As your accounting partner, we can:

• Show you how to clearly separate your personal and business finances
• Set up your bookkeeping to be as streamlined, automated and efficient as possible
• Show you the best software tools and processes for managing your expenses
• Become your tax agent and take care of all the complex tax filing tasks
• Provide reporting, management information and advice to guide your decision-making

Get in touch to talk about outsourcing your finance tasks. 

Get the business you want!