Accounting mistakes occur from time to time, but they could be prevented through proper preparation and planning. It takes more time to fix an error than get the right amount at the very first time, but it is cheaper to find and remedy mistakes early in the task instead of waiting at the end of the task (Alternatively, you may get an accounting firm in Johor Bahru to help you).
The following are solutions to the top common errors in accounting made by small company owners.
Failed to Follow Accounting Procedures
It is necessary for freelancers, self-employed individuals and small business owners to have formal, well-documented and comprehensive procedures to manage their accounting and bookkeeping (Also see Bookkeeping Tips for a Newly Incorporated Company). To do so, we need to have standardised checklists and forms to achieve precision and consistency.
For instance, you need to document a procedure to set up new suppliers. The details that you will need are the vendor’s name, telephone number, address and other related documents which are letters of recommendation, insurance or signed contracts. Then, you need to input this information into the accounting software to process the payments.
Hence, it is suggested that to take some time thinking about the details that you need to collect from the suppliers and make a standardised form as well as a written policy to enable your workers to understand the procedure (Also see How Accounting Service Helps Small Business).
Working Without Budget
Business owners are recommended to have a budget plan so that they could evaluate their business’s operating results. Having a budget plan is helpful as it prevents overspending and encourages business owners to set financial goals. You can use your budget to set logical financial objectives, whether it is decreasing operating costs or increasing incomes.
Mistakes in Data Entry
Data entry mistakes happen every time. Even though we could not avoid all mistakes, we could establish a policy to carry out different reconciliations, such as bank reconciliation, promptly to make sure the errors are identified and could be remedied instantly.
To illustrate, you are asked to carry out accounts receivable and payable reconciliations as well as monthly bank reconciliations. You could use budget-to-actual variances in detecting possible mistakes in categorising expenditures or earnings in the Profit and Loss. You should also review abnormal transactions to make sure that the transactions are accurate, and there are no data entry errors.