If you’re a small business owner, chances are that you’re chocka with tasks and responsibilities.
So you may not have a lot of time on your hands and you might find it difficult to give proper care and attention to your accounting requirements.
If you don’t have experienced accountants or NZ accounting services, handling your finances, that is a recipe for a lot of accounting errors.
What are accounting errors?
Accounting errors are mishaps that occur while processing and recording financial transactions. 60% of accounting errors are a result of bookkeeping errors, while human error accounts for 41% of inaccurate financials.
How do accounting errors affect your business?
Can accounting errors really be that bad? How would they affect your bizzo? Let’s take a squiz.
Stakeholders (investors, creditors, ceos, and executives) will be misled – Parties that rely heavily on your financials will be misled and will lose their faith in you. No matter how cashed up you are, this can affect your business dramatically.
Wasted time and resources – If an error goes undetected for a long time the time and resources used to process a number of records would have been wasted.
Cash flow problems – When your accounts and books are not updated, this may create cash shortages, commonly known in the accounting world as “cash crunches”
Fines and penalties – Your company can face fines and penalties, imposed by authorities like the IRD if your accounts have grave errors in them that go unchecked, especially when it comes to tax revenues.
What are the most common accounting mistakes?
Overstating/understating cash flow – Inaccurately recording cash inflows that are higher or lower than they actually are.
Tracking income and expenses incorrectly – Failing to accurately record and maintain accounts of income and expenses.
Improper record keeping – The negligent handling and maintaining of accounting records.
Inadequate checks and balances – The lack of control and safety mechanisms that optimise a company’s financial transparency, accuracy, integrity, and accountability.
Skipping bank reconciliations and loan reconciliations – Skipping the verification of financial records and loan payments.
Undeposited funds on the books – Errors caused when there are too many undeposited funds that are recorded on the books.
Over-relying on automation – Technical and coding errors of automation systems can lead to many errors that go unnoticed.
Forgetting to pay invoices – Errors like overstated liabilities caused when you forget to pay any invoices that are due.
Missing signs of fraud – Failing to recognise obvious signs of fraud can cost you and your business a lot of resources.
Changing a closed period – These errors can badly affect the comparability and the audit trail of the accounts.
Why do accounting mistakes happen?
The main reasons behind common accounting mistakes include incompetent staff, inadequately trained staff, obsolete accounting practices, excessive manual processes, bad communication, poor financial systems, bad review processes, departmental inconsistencies, and fraud.
How can you stop accounting mistakes from occurring?
There are a few steps that can be taken to avoid these mishaps. These include creating a budget, using good software, keeping your files and books updated and backed up, doing account reconciliations, saving and backing up receipts and documents, investing in highly qualified and experienced accountants, and conducting external audits.
How virtual assistants can help
Avoiding accounting mistakes might sound easy but it’s really quite tricky, because there are multiple aspects of the accounting process that need to be kept in check.
Especially if you’re a small business owner, accounting processes might lie beyond your area of expertise. And hiring new staff might just be too dear.
In this case, virtual accountants are a better option for the following reasons:
- They have tried and true knowledge and experience in accounting tasks.
- They don’t come with excessive added costs (no indeed for salaries, bonuses, resources, or maintenance costs).
- They come with little to no commitments (leaves, holidays, etc.).
- They use the latest and the most advanced accounting software.
- They are highly updated on industry standards and best practices.
- Their work is highly professional and monitored and leaves no room for fraud.
- They offer time-flexibility.
- They offer scalability for when your business expands.
Outsourcing accounting is a game-changer for any business. If you’d like to explore in detail how it can help your business, check out our Ebook. Drop your email address in the chat and we’ll send it to you.
Top virtual accounting services and tax experts in NZ
We offer virtual accounting services with a vast pool of highly qualified professionals. Our packages Rental, Essential, Team, and Corporate are comprehensive packages that cover many elements like bookkeeping, payroll, and taxes.
But if you’re looking for a more exclusive experience of these services you can check out our bookkeeping packages, payroll management services as well as payroll auditing services.
Our tax accountant services are among the best small business accounting services in Auckland. As experienced small business tax guides, we can take care of your tax returns needs.