How to Avoid the Three Biggest Small Business Accounting Headaches

Keeping track of finance and accounting is often one of the hardest parts of running your own small business — but your business depends on it. Some parts of accounting are more challenging than others, and can take extra effort to understand and manage properly. So what can you do to simplify your small business accounting and run your business more smoothly?

We’ve brought together three of the main challenges that small businesses face, so you can manage the financial and accounting tasks your business requires without being overwhelmed.

Trouble Handling Accounts Receivable

Accounts receivable can be a significant headache because your small business needs money coming in, especially the money that was promised. Service companies generally get paid after the work is completed, but many businesses end up with unpaid invoices, at least for a portion of time. Missing that amount of money for any length of time and managing the process of collecting, processing and reporting those payments can all be challenging.

Difficulty Deciphering Cash Flow

It can be hard for many small businesses to have a complete grasp of cash flow. It can seem like the business has a certain amount of money coming in, but some of that money might not be paid until a future month or something could go wrong with a sale, meaning that the business shouldn’t count a sale until it is complete. At the same time, it’s essential to see every amount that is leaving the business due to various expenses, as well as amounts that need to go back into the business. Without proper tracking, it can be difficult to see actual profits.

Taking Care of Payroll

When your small business has employees, the payroll process can be another major headache. Some challenges in this area can include:

  • using outdated payroll methods
  • having trouble managing the time and effort involved
  • keeping employees’ information secure
  • having difficultly keeping up with laws, tax requirements and changes

What exacerbates the situation is that payroll needs to be completed on a constant basis.

 

How to Avoid These Headaches

A survey by Wasp Barcode Technologies showed that many small businesses do not seem to have enough professional help when it comes to accounting. While 71 percent of the small businesses surveyed outsourced their tax preparation to an accountant, only 50 percent outsourced their payroll process and just 14 percent outsourced bookkeeping. Also, only 25 percent of the companies surveyed with 11 to 25 employees had a CFO or controller, and 46 percent of companies with 26 to 50 employees did. At the same time, just 14 percent of the small business owners claimed to be extremely knowledgeable about finances and accounting.

Small businesses can work to rectify the financial headaches they face and avoid these challenges from happening in the first place by having dedicated professionals take over this role.

Some businesses might decide to hire an accounting department, while others will focus on outsourcing accounting and bookkeeping service in Atlanta to an experienced and professional firm. Professionals can take over this part of the business, so the owner and other employees will be able to focus on their own strengths. By choosing an accounting firm, the small business will ensure that financial experts with knowledge and experience are managing its finances.

These professionals are equipped to perform accounting services correctly and according to regulations and laws, while keeping up with changes in the field. Accounting services can help a small business streamline its accounts receivable, cash flow, payroll and other financial areas to help the business function properly and stay in business.

These Small Business Accounting Mistakes Will Cost You

Most small business owners would rather think about anything besides taxes, and bookkeeping can be a thorn in their side as well. Just about every business move you make has a potential accounting or tax ramification, and it’s all too easy to make a wrong move that can cost your business at tax time. A bookkeeping service Atlanta knows and trusts can help to alleviate your stress and anxiety. Here are eight of the most common (and costly) small business accounting mistakes:
  
1. Not Keeping an Expense Log and a Tax Diary
Many small business owners make the mistake of thinking that since they save their receipts, no further documentation is needed. An expense log will give you a feeling of organization and control, and a simple tax organizer book can help you to answer key IRS questions ahead of time. Staying on top of these numbers during the business year can help you to document your expenditures correctly and completely.
  
2. Making All Workers Independent Contractors
Having employees can certainly be costly, while with independent contractors, you can avoid having to contribute to their tax withholding. However, you’ll also lose quite a bit of control over the worker, which could impact your business negatively. Also, be aware that if you incorrectly designate someone as an independent contractor, this could lead to steep penalties from the IRS.
  
3. Missing Out on Deductions
Did you know that personal services like tailoring or dry cleaning during a business trip or having a meal out with friends that involved talking business are deductible? Just be sure to document them in your tax diary (see step number one). Consult a bookkeeping service Atlanta respects to help you get all the deductions to which you’re entitled.
  
4. Borrowing Against Employee Withholding
When cash flow is at an ebb, some business owners may be tempted to use the monies set aside for Social Security and employee withholding. However, doing so is a major mistake that could incur large penalties.
  
5. Giving Yourself Too Many (Unsubstantiated) Raises
Corporation owners have to watch out for this costly mistake: a dramatic increase in what you pay yourself must be well substantiated, or some of this revenue could be disallowed as unreasonable compensation by the IRS. It can then be taxed and redistributed as a dividend for which you’ll then be taxed again.
  
6. Celebrating Refunds
Yes, on the surface, it feels better to receive money at tax time than to owe; however, the truth is you’ve let the government hold onto your money interest-free for months. Have your Atlanta accountant adjust your withholding so you’re closer to break-even.
  
7. Going it Alone
Some small business owners feel they can handle their taxes and bookkeeping and save money in the process. However, the truth is that as your business grows and becomes more complex, so do your accounting and tax considerations. In addition to potentially handling your taxes and accounting incorrectly and becoming a target for an audit, you might also miss some key deductions or credits that could make your tax bill lower. When in doubt, don’t go it alone; call on the help of a bookkeeping service Atlanta knows and trusts.
  
8. Hiring the Wrong Accountant
Hiring an inept or unscrupulous accountant can be as costly going it alone. Be sure to check certifications, track record, level of small business experience, knowledge of your industry, and what others are saying about them. Get a referral and/or check the company’s testimonials online to ensure that you are hiring a high quality Atlanta bookkeeping service.

Business accounting and tax time are full of potential pitfalls for the small business owner. Don’t fall victim to these common, costly small business accounting mistakes. Hire a bookkeeping service Atlanta knows and trusts to help you navigate the ins and outs of accounting and help ensure business success going forward.