There are many challenges when operating a small business, but few have the potential to affect your financial future as much as improper accounting practices. They can lead to lost profits, fines, penalties, and more. Here are 5 common accounting mistakes that you can avoid with the help of a small business CPA.
1. Being Lax About Bookkeeping
Even if you have only a few people working in your business, it is important to keep accurate records of all your financial transactions. A few missing receipts here or there or a misplaced invoice may not seem like much, but these mistakes can add up quickly, especially as your business grows. This can lead to confusion when accounts are reconciled, missed deductions, tax errors, and more, it can give you a false impression of your business’s financial health. A skilled CPA can work with your business to streamline your bookkeeping process and make sure every transaction is properly recorded and documented so that there are no surprises at the end of the financial year.
2. Not Documenting All Expenses
When you are busy, it may seem like nothing to spend a few dollars in cash here or there to buy basic business supplies like stamps or pens, but even small expenses that are not documented properly can lead to confusion later. Even the smallest expenses should be recorded and documented with a receipt to ensure that your business does not miss any opportunities for deductions while minimizing tax liabilities. A small business CPA can work with your team to ensure it is as easy as possible to document expenses.
3. Mingling Personal and Business Funds
When you own and operate a small business, it may seem convenient to simply deposit any profits you make into your personal bank account or to pay business expenses with your credit card, but this can create problems in the future. Not only does it make it difficult to determine if your business is making a profit, but it can put your personal assets at risk should your business ever face legal issues. A CPA can help you establish separate accounts for your business and make sure that all personal and business expenses remain separate.
4. Not Choosing the Correct Business Entity
While it may be simple to start a small business as a sole proprietorship or a partnership, if your company is sued for something like defective products or on-site injuries, your personal assets may be put at risk, such as your home or personal vehicles. A small business CPA can help you form your business as a pass-through entity like an LLC or S-Corp, which protects your personal assets while allowing the business’s income to be claimed on your personal tax return, similar to a sole proprietorship or partnership.
5. Not Using Accounting Software
Using manual bookkeeping methods can make it difficult to track the financial health of your business, and they are prone to mistakes. Modern accounting software like QuickBooks, Xero, or FreshBooks can make it simple to track income and expenses, and if you are working with an accountant, they can make the accountant’s job much easier. A small business CPA can help you choose the best accounting software and work with you to use it effectively.
CPA Services in the Dallas Area
When you need an experienced accountant to help manage your small business in the Dallas area, talk to our team at Gurian CPA. We feature a full line of services for your business, from accounting and bookkeeping to tax preparation, business entity formation, payroll services, and more.
Call (469) 306-9866 for more information about our services and how they can help your business thrive!
