As a business owner, you rely on your accounting system to tell you about the financial health of your business. Also, it helps you comply with tax regulations and avoid a government audit. This is the reason you must get your accounting right. However, mistakes can be made when you try to handle accounting on your own. Because of this, working with Williams Accounting & Consulting services makes a lot of sense. By working with the right accounting firm, you can avoid errors and get an accurate picture of what is happening in your business.
Common Accounting Errors
Accounting errors can happen because of simple mistakes or a misunderstanding of accounting rules. The following are common accounting errors that can be avoided when you hire an accounting expert:
- Data entry errors. Mistakes can be made in the way data are entered into your accounting system. These include transposing figures, entering data in the wrong account, duplicating or omitting an entry, and leaving out a decimal place.
- Omission. This is made when you fail to record an item. For instance, you may fail to note the receipt after an invoice is paid. This is possible when documentation is not organized.
- Commission. You can make this mistake when you put an item in the wrong place. While you may enter the correct amount and place it in the correct general account, you may use the wrong sub-account.
- Transposition. This can be made when you record the wrong amount by reversing numbers. As a result, an item’s amount can be overstated or understated.
- Duplication. This happens when you enter the same income or expense at least twice. For instance, this can occur when one or more persons can access your accounting system and make the same entry.
Impact of Accounting Errors on Your Business
Accounting errors can have serious consequences. When income reporting is not done correctly, it can distort the computed profit margins of your company or lead to the income being over-reported. Also, an accounting error can result in wrong cash flow information. When this happens, you may not be able to have accurate data on the amount of cash on hand for paying bills and other financial obligations.
Moreover, income and expenses won’t be properly matched because of accounting errors. When expenses are not classified in the right month or year, they won’t occur as they should. And when such errors are not discovered on time, invoices may already be past due and lead to extra fees and interest. Given these effects, you should take your accounting seriously by letting the experts handle this task.