How to Catch Accounting Mistakes

Even if you are careful with data entry and tracking your business transactions, it’s inevitable that mistakes will happen in your bookkeeping. The problem is that these seemingly small accounting mistakes might seem trivial right now… but the long-term effects can be disastrous on your company.

Accounting mistakes throw off your reports and balances, which means that you are looking at inaccurate information when evaluating the current standing of your company. When you are making important business decisions, you need to be confident in knowing your current cash situation and how your decision will affect things in a few months or years. The only way you can have confidence in these critical financial decisions is by ensuring that your bookkeeping is accurate… which comes down to minimizing and correcting accounting mistakes whenever possible.

The truth is that mistakes are unavoidable. But they don’t have to be the downfall of your small business. The following tips will help you minimize the likelihood of mistakes, help you correct the issues when they arise, and save you the headache of inaccurate financial reports.

Tip #: Update Your Accounting System

Any time you are working with manual calculations, you can know that there is a high risk of accounting mistakes. Small businesses often start with DIY financial tracking, such as spreadsheets or handwritten notes. We live in a modern world with great accounting tools, which means that you are missing out on a variety of features if you haven’t already implemented a good accounting system.

The first step to reducing mistakes is to reduce the manual data entry and calculations that are occurring. Modern accounting software programs simplify the bookkeeping process by automating the transactions as they move through your bank accounts.

When you are using a proven accounting and bookkeeping system, then you can have confidence knowing that the software is carefully designed and proven to improve overall results. Plus, you have the benefit of being able to access your financial information from any location since many of these programs are hosted in the cloud.

Tip #: Separate Business and Personal Spending

One reason you might be overlooking accounting mistakes is because of the mix-up of transactions between personal and business spending. If you are mixing these transactions, then you are setting yourself up for problems in the future. Even if you are just getting a new business off the ground, make it a priority to set up a new business account as soon as possible. The goal is to keep the funds separated so you don’t have crossover between your business and personal spending.

When personal and business transactions are mixed, it is the perfect environment for confusion and disorganization… which inevitably leads to accounting mistakes. These small mistakes can be costly to your company if you file your taxes incorrectly or miss out on potential deductions.

Creating a separate business account offers a long list of benefits you will enjoy in the future. You always know how much money is in your business account, making it easier to avoid overspending. Plus, you won’t be tempted to spend the extra business money on personal costs. Instead, keep the money separate so you have money set aside to reinvest in the future of your business.

Tip #: Save Printed Documents

We understand why you are looking for ways to move to a paperless accounting system. But don’t throw out the paperwork and receipts until you have verified that the transactions are correct. These transactions can be digitized, but you also need to maintain the records in case of an audit in the future.

The best way to protect your business is to hang onto these records for at least three years. Design an effective filing system so you can refer to the records if needed. For example, if questions come up about potential accounting mistakes, then it can be helpful to refer to your documentation to clear up the issues.

Tip #: Always Reconcile Your Accounts

One of the biggest mistakes you can make is assuming that your reports and records are always accurate. Mistakes happen, which is why you need to build in checks and balances to identify and correct these issues as soon as possible. The chances are high that you’ll make a few accounting mistakes here and there, and your accountant can help you catch these mistakes before they turn into serious issues.

Small accounting mistakes are easy to find through account reconciliation. This process requires that you compare external records to the numbers in your books. For example, you might compare bank statements with the numbers showing in your accounting software.

This reconciliation should happen regularly. It’s common for businesses to have reconciliation schedules for monthly, quarterly, and annual checks. Large corporations might have reconciliations happening more frequently, while small businesses can have semi-regular reconciliations since there are fewer transactions to evaluate.

Don’t stress because accounting mistakes are identified on the account reconciliation. Instead, use this opportunity to identify the issue. Then, you correct the problem right away to minimize the long-term effects. Additionally, look for ways that you can improve your systems if needed, helping to reduce the likelihood of the same mistake being made again in the future.

Tip #: Double Check Everything

When you are inputting information in your books, dedicate a little extra time to double check the work you are completing. A few extra minutes can go a long way to catch typos and small accounting mistakes. You need to be sure that what you enter into the software program matches the records you have for each transaction.

Watch out for these common mistakes:

  • Categorizing the transaction under the wrong spending code
  • Recording the transaction to a different account
  • Transposing numbers or misplacing a decimal point
  • Entering the wrong numbers
  • Flip-flopping entries
  • Marketing accounts payable as accounts receivable
  • Forgetting to record an invoice

Remember that a few small accounting mistakes lead to disastrous results in the future. Even if you are short on time, it’s worth the investment to spend a few extra minutes double-checking your entries.

Tip #: Maintain Consistency with Your Schedule

Mistakes are more likely if you are crunched with time at the end of the month – trying to get your books caught up from all of the transactions that came through in recent weeks. Instead of procrastinating until the last minute, you need to implement a consistent process to ensure that you are staying on top of everything that is moving through your business.

If you don’t already have a system in place, now is the time to create a new accounting process. The development of solid financial and accounting systems is a valuable addition to protect your business in the future. These systems make it easier to stay ahead of ongoing financial responsibilities, which means that you will be more effective in avoiding accounting mistakes.

Tip #: Get an Outside Perspective

Getting a second set of eyes on your books is an important step to catching accounting mistakes when they pop up. Even if you’ve looked over the numbers 10 times, it’s possible that you might be overlooking details that can be spotted by someone else.

Not only does an outside service provide valuable insights into your financial systems, but outsourced accounting support builds in the checks and balances that are needed to catch potential mistakes. You have the benefit of tapping into professional resources, while also ensuring that you are avoiding common accounting errors.

Let the Pros Catch Your Accounting Mistakes

You are a busy small business owner, which is why it can be a challenge to stay current with your books. As you are juggling all of the daily responsibilities of running your company, it’s important to consider how much you can benefit from hiring an outsourced team of accounting experts for assistance. You don’t have to carry the responsibility by yourself. Let our team do the heavy lifting so you can focus on other daily activities related to running your company.

Investing in outsourced accounting not only reduces the risk of accounting mistakes, but it also relieves the stress you are experiencing. It’s worth the investment! Instead of bringing on a full-time accountant, save money by bringing on an outsourced accounting team – then you can put your time and money back into activities that build your business.

Easier Accounting provides the trusted accounting services you need. Our team focuses on the ongoing financial tasks that keep you ahead of reporting, taxes, payroll, and more. This personalized approach is always catered to the needs of your company, ensuring that you have a solid financial foundation to help your company grow.

If you are interested in learning more about the ways we can reduce accounting mistakes and improve your business financial systems, then reach out to us for a consultation. We are happy to answer your questions and help you find the accounting and bookkeeping services that are a good fit for your unique needs. Call Easier Accounting at (888) 620-0770.

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