This COVID-19 pandemic has lead to many small businesses facing unique and exceptional challenges, often resulting in the amplification of common accounting mistakes. Many businesses stopped operating altogether while others either struggled or had to change the way they worked. Many small businesses are making it through this phase with the help of government assistance and grants, while keeping a tight check on their financial records.
In such a time, it is important to minimize avoidable accounting mistakes. Here’s a quick run down of the 5 most common ones
Every business should have a proper bookkeeping and accounting system which records entries for every transaction in a chronological order. This helps in minimizing accounting errors and identifying them immediately. This also avoids losing out tax deduction opportunities and helps provide easy access to all documents when the annual audit time comes. Lack of organization would mean that the business is vulnerable to delayed payments and financial losses. In times like these with a pandemic going on, your business needs excess cash. Any and every income, deduction, refund, or debtor counts.
Not Adjusting Your Annual Budget:
Budgeting allows you to forecast unnecessary expenses and helps you design a strategy to avoid them. However, your budget pre-coronavirus has got to be way different from your budget during coronavirus. You must tweak your budget to prepare yourself for how your business will look at the end of the year since the outbreak of the novel coronavirus. Otherwise, you may end up paying excessive expenses (that could have been avoided) resulting in a net loss for your organization because businesses have majorly faced a decrease in sales this year.
Small businesses treat bookkeeping like an extra effort they have to make or like a chore that has to be completed. But they do it with such delay that they file inaccurate transactions and receipts and then have to face penalties due to delayed payments. However this shouldn’t be the case as keeping updated records at hand is very essential. You need to avoid any penalties and defaults to save as much money as possible at such a critical time.
Skipping Monthly Reconciliations:
The last thing you need in your accounting records during a pandemic is an error or a mistake which may even make your financial statements look bad. When investing or lending loan to you, investors and banks typically look at your financial statements to know whether you’re worth the risk. Double checking accounts can prevent any fraudulent activities, and can recognize errors and inefficiencies in your accounting records beforehand. If not reviewed and checked properly, accounting records and bank statements can fail to provide the correct view of your company’s fiscal health and may even lead to a tax audit, which can be quite problematic during a pandemic.
Procrastinating Filing Taxes:
The government has been gracious during the pandemic; extending the tax filing deadline and providing grants and refunds. A proper strategy for filing taxes allows you to claim all refunds and deductions, but you need time for this. Procrastinating the filing of your taxes till the last minute or filing late can result in you losing money that could have helped your business cover small expenses.
COVID19 has had a lasting impact on lives and businesses. Trust professionals at Pransform to function as your remote team, seamlessly managing all your financial record-keeping and helping you avoid these common accounting mistakes.
Get in touch with our team for a free consultation today!