Top 5 Accounting Mistakes Commonly Made By Startups

Top 5 Accounting Mistakes Commonly Made By Startups

Do you run a startup and need help for managing the accounting/bookkeeping for your business?

Even if you have accounting/bookkeeping knowledge, chances are you’re still making some mistakes. While it’s easy to ignore and think to yourself “I’ll handle this later”, you have to understand the costs of doing so.

There are certain business operations like tax filing, sales, payments and accounting that serve as the foundation for every new company. Unless these critical functions are successful, your startup will have a very hard time surviving. After all, these functions manage your cash flow and cash flow is the blood of your business.

Another critical function is bookkeeping. It involves recording the daily financial transactions of a business.

If you don’t know the financial state of your business, then how would you improve it?

Just like with marketing and sales, you need to measure everything.

Why is bookkeeping important? 

All entrepreneurs and business owners need accurate financial reports in order to evaluate how well their business is performing. This helps you plan future strategies to grow and expand. Without a strong bookkeeping and accounting system in place, it can be very difficult to make sound strategic and financial decisions.

But the thing is, nobody likes bookkeeping. It’s boring.

In all the excitement, entrepreneurs are busy growing their business, closing new deals, and making more money. All while ignoring their financial recording process.

This mistake could lead to:

  • Wrong tax reports
  • Possible legal ramifications
  • Miscalculated profit margins
  • Poorly forecasted revenue
  • And an endless list of headaches waiting to happen

In the end, any one of these mistakes will cost your business a lot of money and your employees a lot of time.

Although it is recommended that you seek out professional bookkeeping services, being aware of the most common bookkeeping mistakes can also help to prevent errors. Here, we will be discussing some of the most common bookkeeping mistakes that startups end to make and how they can be avoided.

Here is a list of top mistakes that are made by startups and small companies:

1). Mixing Business and Personal Money

How to Avoid It:

It’s never too early to get your business its own credit card and bank account. Use these accounts exclusively for your business expenses. If you accidentally use the business card for a personal expense (or vice versa), make sure to flag it right away.

2). Using Single-Entry Bookkeeping

How to Avoid It:

Start things off right by using double-entry bookkeeping from Day 1. Regardless of which system you choose, you’ll have to switch to double-entry at some point, your partner/investors will want to see proper double-entry books. Like the company bank account, this will be easier to manage the earlier you implement it. Don’t wait until you have to switch.

3). Using Cash-Basis Accounting

How to Avoid It:

Like double-entry bookkeeping, accrual-based accounting is an industry standard, and one that you’ll have to adopt eventually. You can save yourself headache later by using the accrual system right from the beginning.

4). Not Getting Serious Until the Books Are Complicated

How to Avoid It:

Like many of the things on this list, the key is to start early. Don’t ignore your books just because they’re currently simple. In fact, that’s the ideal time to put a process in place that will scale as you grow. Starting off a strong foundation means you’re less likely to have a bookkeeping crisis steal your momentum later on.

5). Not Realizing When You Need Help

How to Avoid It:

How much time are you spending on your books? How often are they being updated? Are you able to get quality financial statements? If the answers to these questions aren’t “very little, often, yes,” it’s time to bring in help.

Founding a company is hard enough, without having to worry about problems in your bookkeeping. To avoid these mistakes, you can call us now. We are happy to share our 60 years’ expertise to how we were able to save big and cut unnecessary factors and overheads affecting to your business environment.

We can provide you UAE’s best Accounting, Taxation, Finance Consultancy, and other allied services. With a solid strategy, your business can tap into some of the best talents in the industry. Save your business’ time and money both, today.

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