As finances flow through a business’ operation, it has become indispensable for an organization to handle their books accurately, as accounting-related missteps and inaccuracies could cost a pretty penny and negatively affect the company’s bottom line in the long haul.
While this is especially true during tax season, such instances can be prevented. Outlined in this piece are the usual financial mistakes various businesses are guilty of, which other ventures in the Philippine commerce should take notice.
7 Most Common Accounting Mistakes of Businesses
1) Inaccurate Data Entry
With the amount of data managed by the accounting department, small mistakes here and there become inevitable. Human error plays a huge factor during the manual input of data into accounting spreadsheets, which over time could lead to huge consequences.
2) Use of Personal Devices for Financial Data
Saving sensitive financial information in personal devices are potentially not secure and aren’t advisable for businesses. Since these can be easily hacked, the risks of having information leaks increases, which may bring about damages to the company’s reputation.
Implement policies prohibiting saving of data into a personal device, as working on a non-secure network could lead to these harmful disclosures.
3) Unprofessional Hiring System
Hiring accounting employees based on personal connection than professional capabilities may have its advantages such as convenience, cuts down costs, and becomes an act of goodwill. Unfortunately, hiring without evaluating a person’s professional merit could backfire significantly, leaving you with an inept accounting department that will cost you money. Keep in mind to always invest in the right people in order to achieve business’ goals.
4) Performing DIY processes
At the start of your business, it may seem that you have the luxury of time to complete accounting tasks on your own. However, as a company develops, financial tracking becomes difficult. Thus, investment in a competent accounting team becomes mandatory.
5) Submitting Incomplete Data and Tweaking past Information
Revising or turning over your books before all essential data has been recorded are possible sources of number inconsistencies. The best way to avoid such drawback is to run through your data’s quality repeatedly before closing it, which also saves you from the hassle of reopening books thinking there might be erroneous numbers.
6) Inadequate Knowledge Regarding Tax Regulatory Laws
An accounting department not responsible enough to keep pace with the rule changes concerning tax regulatory laws leaves the entire company vulnerable to massive repercussions in the future. In addition, incompetence regarding tax laws may result in chances of missing out on potential tax incentives, which can aid in raising organization’s bottom line.
7) Not Reviewing Balance or Income Statement
Revenues, expenses, assets, and liabilities must be recorded accurately. A good rule of thumb is to hold a numbers check at least once a month. Incorrect numbers in the said columns can lead to discrepancies, which may pile up and magnify in the long run.
Proper quality assurance is essential for balance sheets since human error, as mentioned, is inevitable. Quality assurance is a huge factor in ensuring that contained data in your sheets are reliable and won’t cause harm to your company.
While these are just a few of the usual mistakes included in this business aspect, bear in mind that other departments are possible sources of errors as well. Be mindful of all processes transpiring in your organizations to avoid occurrences of consequences. If you want to focus on your core business tasks, an option is to work with a company that provides bookkeeping and accounting services who can help you avoid these mistakes.