Although accounting errors can happen occasionally, there are many ways, programs, and techniques to avoid these issues. It is actually easier to rectify such errors than to get them right initially.
Accounting errors can get worse if they are corrected on time. Experts recommend giving a look at the company’s accounting before it is too late. Anyway, you can repair them now or later, but sooner is better, since it prevents the collapse of the company’s economy.
Proper management of a company’s accounting is important because it enables the company to comply with all tax obligations. We will explain a series of accounting errors that disrupt the finance management of your company.
1. Wrong transcription of the accounting data
Since accountants perform similar tasks every day, they commonly make mistakes when transcribing accountancy information. Although most errors are minimal, they can lead to large imbalances in the company’s accounting that do not reflect in the actual status.
2. Work without accounting software
Currently, keeping a company’s accounts by hand is crazy and time-wasting. Today’s companies use accounting software that does the math in a much simpler way. These programs have a database that collects data, avoiding possible loss of relevant documents and accounting errors.
3. Not keeping receipts of the income and expenditure
Even if the amounts of the proof of payment or the tickets are tiny, you should always keep them to carry out the taxation in the IRPF and the VAT of this income or those expenses related to the company’s activities.
4. Not making accruals correctly
Many accounting errors stem from amortizations. A higher amortization causes a significant decrease in the accounting result.
5. Unaccounted bank receipts
Some expenses are deducted without invoices that can justify them. Insurance premiums or self-employed contributions will be always necessary.
6. Not keeping the accounting books up to date
Not keeping the accounting books updated is one of the most common accounting errors. This procedure will depend on the tax regime of the company’s economic activity. Outdated information triggers a much more complicated bank reconciliation and tax payments.
7. No backups
Likewise, if we update data without backup copies, we will make a worse mistake, as we’ll lose documents that are essential for the company. Documents like invoices must be kept for at least four years.
8. No bank reconciliation
Even if we keep a correct record of the accounting books, you should reconcile this data with the bank account to prevent accounting errors and mismatches that are difficult to solve.
9. Use a bank account for everything
Do not use your personal bank account to pay and keep an eye on the income and expenditure of the business. This leads to accounting errors and makes business management more difficult than it is.
10. Investment and current spending
Investments are often confused with the current expenditure of a company. While the investment obtains future benefits, the expenditure is necessary to pay for goods and services.
How are accounting errors avoided?
These accounting errors can be easily avoided by paying special attention to everything related to the company’s accounting and the actions related to it. Below are some tips to avoid accounting errors:
Make careful accounting records
This is achieved through an exhaustive process that checks that the income and expenditure are correctly justified. No expenses should be disregarded, no matter how insignificant they are.
Make balances of sums and balances
This will allow you to have a global vision of the balances divided into accounts and accounting periods. The balances help to detect accounting errors at a much higher speed. By doing this, you also protect your movements from deletion.
Use accounting software
Accounting software is a tool that allows optimal performance of all the financial tasks that accountants carry out on a daily basis. It makes it possible to manage a large amount of data and automate processes that take a lot of time manually.
Reconcile your bank account
A reconciliation of the bank accounts will always reflect the real treasury of the business.
Do cash registers
This is nothing more than comparing the cash available to the company with what the company actually loses on sales and debits. This facilitates the detection of accounting errors and possible financing imbalances.
Take control of your accounting
In conclusion, ensure the information that flows in the system is the same as you have in hand. To prevent accounting errors, accounting should be done frequently.
When done properly, audits help clean up the accounts. To guarantee that your accounting is completely transparent and the procedures are well-executed, consider the following aspects:
- The data must reflect the assets and the financial situation of the company. These pieces of information must match to prevent fraud.
- The data should reflect the provisions of the current legislation
- There are no omissions of information or data.
- The accounting revision must have a neutral character.
Ernesto Góme is a Venezuelan writer with 7 years of experience in different niches, such as lifestyle, fashion, health, culture, and anime. He loves reading about multiple topics and is always researching to inform readers about home and health trends.