Accounting mistakes occur in businesses of all sizes. They can be a result of inadequately staffing accounting departments or simply from processes that aren’t organized and scalable. In any case, avoiding mistakes is always the most cost-effective and timesaving approach. Here's a look at five common accounting mistakes staffing firms make and how to steer clear of them.
1. Lack of Organization and Protocols
Organization is critical to proper bookkeeping. From sorting and storing receipts to entering information into digital systems, an accountant has to be diligent about keeping things in order. Failing to do so, especially when it comes to the smaller details like managing paper receipts, can lead to big issues — especially if the IRS ever audits your business.
Ultimately, organization and attention to detail are two of the most crucial characteristics to look for in an accountant. A lack of either of these traits could set a company up for failure. Of course, you can't just rely on the individual in full. Companies should ease the burden of organization by establishing the right protocols, such as an accounting schedule, that keeps the accountant (or the accounting team) on track. The consequences of improper record keeping can crop up years after the person responsible has moved on to another job. As an owner, the importance of setting up good record keeping and monitoring your staff to make sure they continue the practice is imperative.
2. Improperly Tracking Small Transactions
When reconciling accounts, even the smallest difference between in-house ledgers and actual bank statements can eventually add up to major discrepancies. Entry errors happen, especially when human hands are involved at multiple entry points, but such errors have to be searched for and corrected regularly. The responsibility can't fall solely onto the accountant's shoulders for these types of mistakes. Every company should strive to simplify onboarding, invoicing, pay structures , commissions and any components of the staffing business that need to be repeatable and scalable.
3. Failing to Use the Right Accounting Software
According to a survey, an astonishing one in four businesses still uses paper processes to track their finances. Not only does that represent cumbersome, time-consuming touch labor for accountants, but it also means more time, money, and potential for error on the larger scale.
Businesses have a variety of reasons for not yet adopting digitization, but the pressure increases as digital accounting software continues to help competitors cut back on costs. With that said, the move towards digital can also cause another problem: businesses failing to fully consider their needs, their options, or both.
Whether you currently use accounting software is almost irrelevant, as only the right accounting software helps your company achieve more with less work, less error, and less time. Choosing that software can be a daunting process, but it's one worth pursuing if you're still using paper records or if your business isn't taking full advantage of features like receipt scanning and instant reimbursements.
4. Oversimplifying Accounting Procedures
While this may seem counter to item 2.) above, firms can also make the error of oversimplifying their book keeping. Cash in the bank is no way to understand the profitability of your business from month to month. Its imperative that your processes, systems and staff work together to follow proper accrual accounting processes so you understand how your business is doing from month to month.
5. Rushing to Hire the Wrong Person
Nearly half of all small businesses in one survey don't employ an accountant or a bookkeeper. Many business owners also try to take the "do-it-yourself" approach to finance, at least at the beginning. Ultimately, though, as businesses grow and software offers more opportunities for optimization and easier administration, hiring the right person to handle accounting is of growing importance.
For those companies considering hiring an accountant, particularly for the first time, choosing the wrong person is far too easy to do. Businesses first need to understand their needs, their outlook for the future, and what they want to get out of their accountant on a day-to-day basis. For instance, some small businesses just need a bookkeeper, while other companies want someone they can turn to for ongoing financial advice to help them reach their expansion goals.
Choosing the right accountant or bookkeeping solution is a challenging piece of the puzzle.
A great way to avoid all of these potential mistakes is to consider outsourcing that aspect of your business. At AdminAssist, we live and breath the accounting and processes that help our clients thrive. We’d love to help your company and your peace of mind. Contact us today for a consultation.