Keeping track of finances can be tricky. Organizing one’s financial life requires that one diligently pays bills, keeps track of spending and maintain a budget on a regular basis. The problem is that most people get caught up in the busyness of the day and forget to do these things that are so important for staying on top of personal finances. Whether you are taking care of your own finances or the finances of your business, there are some common accounting mistakes that you should be sure to avoid. Here is a list of the top four accounting mistakes that you can stay away from in the future.
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1. Making Payments Too Early
It may seem counter-intuitive, but a lot of business people go wrong when they decide to pay utility bills too early. Always try to wait for a few days prior to the due date of a bill before you pay it. You never know when you may need access to the cash for your business. The same goes for your personal finance. If you pay bills too early, then you may not have the cash that you need to pay for school supplies, groceries or other daily necessities of life.
2. Failing to Maintain a Budget
It is essential that you maintain a budget. Even people who are pros at being frugal need to maintain a regular budget. It is not that you need to stick exactly to the budget. The benefit of having a budget is that it always provides you with an idea of what the cash flow is for your household. You always have a clear vision of the amount of income that is entering your household. You can then manage your funds in a better fashion. For your business, it is important for you to maintain a budget in order to avoid excessive spending on business supplies. Business owners frequently go over-budget in the early years of a business. Try to avoid this mistake by taking a couple of hours to draft a budget.
3. Not Backing Up Your Information
If you keep your information stored on a computer, it is essential for you to back-up your information. In the event that your computer crashes, you will not be able to access your financial records. Make a copy of all of the information on your computer so that you are never stuck without your credit card information, budgets or household account information. You also want to back-up information so that you have all of the previous data for your business in the event that the IRS requests it. If the IRS requests information, you will be expected to hand it over within only a short time period.
4. Filing to Have a Separate Account for Business Purposes
One of the most common mistakes made by business owners is the failure to have a business account for business expenses. When you use a household account for business purposes, you can easily overdraft the account and leave your family penniless. It is important to have a business account so that you protect your family. Having a business account will also give you a peace of mind. You will have a better idea of what the financial situation for your family and business is at all times.
Every week, you should try to include a section of your “to do” list for the finances of your business. Remembering to set a task list will help you stay on top of your finances and avoid all of these mistakes. You should be diligent in taking care of the finances for your business.
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Lanie Patterson is a corporate accountant and guest author at Accounting-degree.org, a site with resources to help prospective students evaluate accounting degree programs online.