Business finance is a complex matter. Figuring out how to manage your business profit and cash flow has been an ongoing challenge to large enterprises and small businesses. Often times, mismanagement in finances leads to the downfall of companies.
But this can be prevented by knowing the pitfalls and how to avoid them. Top accountants and vat consultants in dmcc compile a list of accounting mistakes that every business owner should know and avoid:
- Not being on top of your accounting
A lot of business owners are not adept with the basics of accounting, but it doesn’t mean that you will let others to manage your business finances. The very least that you can do is to learn the basics of accounting so you can scrutinize the accounting reports being submitted to you. You will be able to determine if there are discrepancies in the reports and if the numbers are not accurate just by looking at it. If you are not an accounting major, you can take some classes to know what business accounting works.
- Failure to update your accounting book
This is a common mistake that can be avoided by due diligence. Not updating your accounting books will result to mismanagement of finances and severe discrepancies. It can also lead to getting a “qualified opinion” audit report which states that there have been misstatements and misrepresentation in the books and documents presented by the company. Be sure to spare time to update your books and check whether the numbers are accurate and correct.
- Not being strict about setting budgets
It is a bad practice to not to set appropriate budgets on a company or department projects. The result of this bad practice is going overboard on project budgets. If this happens a lot, expect that your cash flow would be a mess. It would be best to ask first for an estimated or projected budget before signing an approval. Project presentation should also include a breakdown of possible expenses and quotations from suppliers. This would give you an idea on how much money will be released per project and if there are adjustments needed to be done in terms of project expenses.
- Mixing business with personal accounts
This is also considered a common mistake amongst business owners. Business experts strongly advise against doing this habit. For one, it will be hard for you to track the expenses and there is a high chance that you will spend your business money for personal needs.
Look at this site for more tips about business accounting.