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There’s nothing worse for a business than an accounting scandal. Japanese electronic giant Toshiba recently hired outside directors to their board due to a massive accounting fraud cover-up. After reviewing bookkeeping records, it was discovered that the previous executives posted higher profit earnings of about ¥156 billion (€22.1 billion) for up to six years leading up to 2014.

While you may still be in the early stages of running your small company, it doesn’t mean you can’t make bookkeeping errors that can lead to devastating affects to the operations and reputation of your business. Identifying and recognising common accounting problems you may commit allows you to rectify the issues quickly.

Here are 5 bookkeeping mistakes you should avoid at all costs:

  1. Mixing business and personal finances has to be the most common mistake that new startups make during the first few months of operations. Instead of having a personal account and a business account, you may end of placing all profits into your personal banking account. The waters can become even more muddy when you begin using business credit cards to pay for personal items that are included on your balance sheets, leading to extra problems when filing annual returns.
  2. Not deciding on an accounting method can quickly cause issues as you may flip and flop between the cash basis accounting method and the traditional accrual basis accounting method. You will have to decide on the best method that suits your business, whether you want to account for income made when the cash is received (cash basis) or when you send out the invoice (accrual basis).
  3. Never push aside the business accounting tasks if you don’t know what you are doing. If you can afford to hire an accountant at this early stage, then do so, so you are reassured that your bookkeeping will be handled correctly while you focus on business operations. If you can’t afford an account at this phase of operations, look toward cloud-based accounting software. You can easily input data while having a secure system that is always accessible.
  4. Incorrectly classifying expenses and assets my lead you to double report earnings or expenses from one month to the next, or place the items on the wrong fiscal year. Reviewing what the expense budget is and what actual expenses occurred can allow you to spot mistakes. Always separate assets and liabilities while reconciling accounts so your balance sheet shows accurate information.
  5. Forgetting to record inventory or expenses as they happen can be a simple mistake to make. You are so busy running daily operations that the accounting aspect falls into neglect. By omitting such data, your records may indicate that you have more or less inventory in the business, or lesser expenses that you paid to vendors, causing your business to appear as if it is doing financially better when this is not the case.

There are many more bookkeeping mistakes to avoid besides the list that we mentioned above. Sitting down with an accountant allows you to hash out the details so you have the right accounting procedures and accounting software up and running the first day of your business operations.

Marc O'Dwyer

After completing a Graduate program in Marketing, Marc’s impressive sales career began at Allied Irish Banks, Pitney Bowes and Panasonic where he received numerous Irish and European sales performance awards and consistently exceeded targets and expectations. In 1992, Marc’s entrepreneurial spirit led him to set up his own business, Irish International Sales (IIS). Initially, this company was a reseller for Take 5 Accounts and Payroll software. Within four years, IIS became the largest reseller of Take 5 in Ireland, acquiring four other Take 5 resellers. He also found time to set up two mobile phone shops under the Cellular World brand and a web design company offering website design services for small businesses. In 2001, he bought the majority share in a small Irish software business, Big Red Book. At that time, the company was losing money. The company became profitable within two months, and Marc then acquired a payroll company to compliment Big Red Books Accounting products. In 2003, IIS were appointed as Channel Partners with SAP for their new SME product, SAP Business One. Marc sold his Take 5 business and concentrated on developing this new market for SAP As a result, by 2007, IIS was recognised as the largest Channel Partner for SAP in EMEA (Europe Middle East and Africa). In 2008, the IIS Sales Manager bought the Company from Marc in an MBO. He launched Big red cloud in June 2012, the online version of big red book, to date the company successfully converts 59% of trials into sales and the number of customers is growing rapidly. Marc continues to run both Big Red Book and Big Red Cloud which now support 75,000 businesses. He is a very keen sportsman, having played rugby for 20 years, represented Leinster at under 16 and under 20 levels, and league squash with Fitzwilliam Lawn Tennis Club for 10 years. Marc has competed in 11 Marathons, including the London and Boston Marathons, and has completed several Triathlons and Half Ironman races. He has also completed six Ironman Races in Austria(x2), Frankfurt (Germany), Nice (France) , Mallorca (Spain) and Copenhagen (Denmark)

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