Accounting Disasters that Stunt Growth24th March 2017
Bad Information leads to bad decisions!
Every decision you take in your business is based on some information or some data that you’ve got.
Even if it’s ‘gut feel’.
But how good is that information?
Making bad financial decisions will stunt your growth at best and at worst it could be catastrophic for your business.
So here we have the 5 accounts disasters that could stunt the growth of your business.
1. Bad Records
How do you know that you’ve got everything recorded? Are there any missing Sales/Purchase invoices or receipts? A red flag this is happening may be when a supplier phones you up chasing up an old invoice you haven’t even got in your system?
2. False Claims
We all know it’s really bad to make false claims about our business but are you making false claims in the accounts for your business?
You need to ensure you can claim for legitimate items and not for things you shouldn’t be. That cup of coffee you bought your client the other day….did you claim for that?....because you should have done.
3. Outdated Software
You wouldn’t run a marathon in slippers but companies are doing this with their accounting systems all the time. Make sure you have the right software for the right job and that it’s up to date.
Cheap imitations have their limitations. Using the wrong software will cause you a whole lot of pain in the long run.
Think about your future plans…where you want to be….not just where you are now.
Will your software scale? Will it achieve what you need it to in the future? You don’t want to keep changing!
4. Things Don't Add Up
Another great way to check your accounts are complete and accurate is to check them to other things. Reconcile them to your bank account. If your bank account is not the same as your accounts records something is wrong. Don’t ignore it!
5. Mixing and Matching
Mixing - What do we mean by that? Mixing personal expenditure with business expenditure. It’s not always easy to distinguish between the two. Think of it simply like this…would you have spent that money if you weren’t running your business? You had a meeting with your client in a coffee shop. You can claim for the coffee because you wouldn’t have spent it if you weren’t at that meeting. But, don’t claim for your lunch because you have to eat whether you’re running your business or not.
Matching - What do we mean by that? Matching is about getting things in the right month in your accounts. Just because you spent the money in that month doesn’t mean it relates to that month. Don’t mix up cash and profit.
Take as an example your car insurance. Most of us pay for it once a year. You renew your car insurance on an annual basis and it pays for the whole 12 months. But, just because you have paid for it in one month doesn’t mean it’s the month it should be in your accounts. You need to spread it out over the whole year. Don’t let your accounts become a nonsense.
Use these points to improve the quality of your decisions!