Casinos are usually in the business of ensuring that their visitors lose money, but last year, a festering accounting mistakes cost the Mohegan Sun resort casino approximately $1.5 million. That’s a serious case of snake eyes, yet merely a quarter in the bucket compared to these accounting … umm, mistakes!
Statistics compiled by the United States Small Business Administration show that about 50 percent of new small businesses launched within the United States fail within the first five years of operation . . . and the number one cause of failure is poor financial management.
Viewed in that light, you can see how important it is to avoid accounting mistakes. Even the most skilled and best-intentioned accounting professionals make errors from time to time, and accounting mistakes can lead you to make major miscalculations and improper decisions about the present and the future of your business.
With that in mind, here are some of the most common and costly faulty accounting practices that strike small business owners:
- Improper invoice tracking. Who owes you money, how much do they owe you, and when is the money due to be paid? If you can’t answer these questions quickly and easily, you need to update your invoicing procedures.
- Poor budgeting. It’s important to set a budget and stick to it. Inflating budgets to allow for extra acquisitions, equipment or materials may seem like a good idea, but the reality is that it can handcuff you, potentially leading to long-term problems.
- Misuse of accounting software. Failing to invest in proper accounting software education can lead to major mistakes when using it. Worse, many small business owners rely on outdated accounting methods which simply don’t work for 21st-century businesses.
- Inconsistent reconciliation. Many small business owners wait until tax time to sit down with the year’s business records, and that can lead to inconsistencies in reconciliations and miscalculations. Rather than letting a mountain of paperwork build up, spend a dedicated amount of time every week to making sure your bank records are properly reconciled and that you are aware of your year-to-date tax obligations.
- Missed payments. Despite your best intentions, you may miss a payment to a bank, lender or vendor partner from time to time. However, this mistake can quickly land you in trouble. If you miss payments to banks and lenders, you may be disqualified from borrowing money in the future, limiting your growth potential. Missing payments to vendors can lead to the discontinuation of the partnership, which can seriously disrupt your supply chain.
Think about your current accounting practices. Have you implemented strategies that will help you avoid these mistakes? Can you think of any other techniques you’ve successfully used to keep accounting mistakes to a minimum?
Contact us today to learn more about Optio’s individualized collection strategies.