24 Mar Top 5 Accounting Mistakes to Avoid for Startups
Are you planning to launch your own business? Great! Despite this creative spirit, studies represent that 90% of all startups fail to be successful within the first five years. For many of these startups, the reason behind their failure is not the ideas and services they offer. Instead, it is the mismanagement of their accounts or finances. After all, without having a consistent financial footing, even a reputed business will soon meet their demise.
Being an entrepreneur, you must know what is needed to make your startup successful in the market. To run your business efficiently, you have to perform several accounting tasks consistently. With so many accounting tasks to optimize, mistakes that could hurt the revenue of your company are inevitable. Therefore, you need to be extra careful and attentive towards all your accounting jobs.
This post has put together some common accounting mistakes that startups or entrepreneurs should avoid. So let’s take a closer look.
1. Having a Common Account
Many business owners make the mistake of mixing their personal and professional finances. In the initial stage of your business, these little infractions may not seem essential. But as your company grows, the line between your personal and professional finances can become a serious problem.
So, it’s critical to create a separate account for your business purposes from the beginning and never cross that blurred line. Having a different business account is highly essential when making cash purchases. Everything should flow through your business account. It makes it easy for you to distinguish and track your personal as well as professional expenses.
2. Not Drafting a Project-Specific Budget
Another common cause of early financial distress for startups is – irresponsible budget keeping. Having a detailed budget is a must for any business to track its expenses. Without proper budget keeping practices, your company will end up spending more than what it is earning and can result in bankruptcy.
To avoid future financial issues, make sure to establish a business budget that details prices for all specific projects precisely. It also enables your startup to set its short as well as long-term financial goals.
3. Not Filing Business Expenses
It’s possible to skip small transactions related to your business. But being a startup owner, you should always optimize correct, complete, and up-to-date receipts for all your business expenditures. This will help you prepare accurate and precise statements. Also, when you file business expenses on time, auditors are less likely to charge you.
4. Keeping Business Records Manually
Keeping track of your business data manually is another mistake that can lead you to business failure. If you’re noting down the accounting details of your startup on a paper, you’re definitely putting it on risk. To avoid potential mistakes or handle your finances efficiently, consider using automated, user-friendly accounting software.
Investing in the right accounting software not only streamlines your accounting procedures, but also lowers the risk of making accounting mistakes that end up costing your startup.
Moreover, today most accounting software integrates with your business bank account, resulting in less manual work for you. They also make it ideal for backing up your essential business data whenever an emergency occurs. Overall, having a centralized accounting software will make sure that you or your accountants have all the past, crucial data you require to optimize your payroll, books, and taxes.
5. Not Using the Cloud
With cloud or web services, you can create updated business financial reports accessible to anyone, anywhere, and at any time. That means you or your business partners or employees can access this data whenever required – no need to visit the business personally. Moreover, you get the satisfaction that your financial information is always safe in the event of a mishap or disaster.
Also, if you’re worried about the security of your confidential data in the cloud, remember that cloud service providers are often much more secure than storing data on your laptop or a desktop computer. Keeping your accounting information secure is the responsibility of your cloud service provider. Therefore, make sure to choose a hosting service provider wisely.
These are a few accounting mistakes you need to avoid if you’re planning to launch a startup. Avoiding the above financial mistakes can lower your risk of joining the other 90% businesses. In fact, staying on top of your finances can help you grow your startup and become part of the 10% of startups that succeed.
Besides, the use of cloud accounting software can make your job a lot easier. If you’re searching for a state of the art accounting software solutions, you can consider contacting Cloud 9 Hosting.
For detailed information on our accounting solutions, visit our online portal today. You may also talk to our team by calling at (800) 606-0313 or by filling out our form here.