The in-house accounting practices that you use should make it possible to run your small business efficiently. Companies sometimes adopt inefficient practices that cause them to devote excessive amounts of time to administration. That can reduce the amount of time available to focus on growing the business.

Not Having a System to Track Business Expenses

First, you and your employees need to be clear on what types of expenses can be deducted when you file the company’s tax returns. You also need to have a clearly defined system to manage receipts and categorize expenses.

Without such a system in place, the person who handles accounting may have to sort through a disorganized pile of receipts for purchases that may or may not be deductible. You may miss out on a tax break that the company is entitled to, or you may deduct too much and get audited, which can distract you from other tasks that could help you grow the business.

Not Properly Categorizing Transactions

You have to know how your business is spending money so you can figure out where you’re over or under-budget. All transactions should be broken down into broad categories, such as supplies and transportation. That will allow you to easily compare the amounts you budgeted to the amounts you actually spent. If you discover that you’re going over budget in certain areas, you’ll be able to figure out how to cut back or reallocate resources so the company doesn’t wind up deep in the red.

Making Payroll Errors

You must have a well-defined system to keep track of how many hours your employees work so they get paid the amounts they’re owed. Errors in recording time worked can lead to errors in amounts paid.

If workers are underpaid, that can have a negative effect on morale, especially if it happens several times. Having valuable employees get frustrated, and possibly even quit, can keep your business from growing the way you envision. Disgruntled employees may warn people that the company makes frequent payroll errors, which can make it difficult to attract qualified workers in the future.

Not Reconciling Financial Statements Each Month

Errors in financial records need to be corrected as soon as possible. If you carry over incorrect numbers from month to month, you may believe that the company has more money available than it actually does and may later find yourself struggling to cover the bills. When someone begins to go through financial records with a fine-toothed comb, numerous discrepancies may come to light. Going over statements each month will ensure that errors are caught and corrected quickly.

Get Professional Help with Accounting

Running a small business is challenging enough. Using inefficient accounting practices can slow down your company’s growth. DOAAR has a team of accounting professionals who can use efficient practices to help keep things running smoothly. Contact us today to discuss how we can help your business.