Running a new business is a tall order, especially if you don’t have a lot of training or experience. Bookkeeping and accounting are critical aspects of any business, but they’re particularly important for new businesses and startups who are trying to get off the ground and experience growth. When it’s time to crunch the numbers, new business owners could fall victim to some common accounting mistakes that damage the health of their business.
Distorting Cash Flow
It’s hard to be objective when it comes to your new business. This is your dream, and you need to believe it’s capable of success. Rest assured, it absolutely is capable of success. However, distorting that success will lead to trouble before long. Every time you make a sale or secure a contract, you might be tempted to immediately assume a certain level of profit, but it’s wise to count your chickens after they hatch. If you make a sale but it gets returned, you now have to make that profit adjustment. If you secure a contract but it takes more time and money than you anticipated, some of that profit has been lost. It might seem cynical, but being conservative about profit expectations will ensure that you have a more accurate understanding of the health of your business, allowing you to make better decisions for its longevity.
Blurring the Line
Keep your personal and business expenses separate. When you start blurring the line between personal payments and business payments, you make it far more difficult to manage your bookkeeping. If you can’t keep a close eye on how much your business is actually spending then there’s no way to know how much profit it’s actually generating. This has the potential to hurt more than your business, it can damage your personal finances as well. Take steps to ensure all of your expenses are kept completely separate to avoid serious financial problems.
Running a startup takes an enormous amount of time and effort, leaving little room for anything else. Adding bookkeeping and accounting to your to-do list can run you ragged. An exhausted and inexperienced new business owner will make mistakes when it’s time to run the numbers, leaving them with an incorrect overview of their business’s financial health. Managing the expense for a professional accounting firm might seem like a tall order for a new business, but the knowledge and expertise they can offer will give your startup the best chance at long-term success and ultimately save you time and money.
Trust the Professionals at the Harding Group
Unlike other accounting firms, The Harding Group, located in Annapolis, MD, will never charge you for consultations and strive for open communication with our clients.
Are you interested in business advising, tax preparation, bookkeeping and accounting, payroll services, training + support for QuickBooks, or retirement planning? We have the necessary expertise and years of proven results to help.
We gladly serve clients in Annapolis, Anne Arundel County, Baltimore, Severna Park, and Columbia. If you are ready to take the stress out of tax time, contact us online or give us a call at (410) 573-9991 for a free consultation. Follow us on Facebook, Twitter, YouTube, and LinkedIn for more tax tips.