Aron Govil: Top 5 Most Common Mistakes Made by New SMB Owners with Accounting Systems

by kbing

Here are Top 5 Most Common Mistakes Made by New SMB Owners with Accounting Systems:

1) Not getting into QuickBooks ASAP! 

The biggest mistake most potential business owners are thinking that they don’t need QuickBooks for their business because they don’t have any employees. If you are just doing part-time work or working from home, this may be fine… but if you are taking the first steps to grow your company, this isn’t a good idea! I cannot tell you how many small businesses never grow past 1 or 2 people because the owner didn’t want to use accounting software. Why? Because it’s too much of a hassle learning it! 

Here is an example:

The average person goes out and buys some office furniture for $100. They put that expense in their checkbook register at home because that’s easy enough right? Well then comes tax time – do they enter that into Excel, or try using online accounting software? It’s too much work either way! They don’t want the headache of learning something new, so they just give up on their business.

2) Not asking questions when entering data 

This is probably one of the biggest mistakes I see all the time with small business owners (or wannabe-self employed people). People simply do not like asking questions. It takes too much effort to think about it – how was I supposed to know I needed to ask? Well, what happens is that they end up getting audited because the IRS doesn’t understand how their business works (or lack thereof). When you enter transactions into QuickBooks or Excel – make sure you are 100% clear on exactly what the line item is for. If you don’t know where your money goes, how do expect anyone else to? In order for this software to work properly, YOU have got to take the time and learn as you go along.

3) Not understanding differences in accounting rules 

There are good people out there who want to help new business owners succeed with bookkeeping but there are also some bad apples who simply want to take advantage of unsuspecting people. 

The biggest mistake is thinking that all accountants/bookkeepers know what they’re doing says Aron Govil

Are you new to starting a business and looking for an accountant? Well, there’s good chance you will be solicited (aka: targeted) by these professionals who want your money as much as possible – but the problem is they don’t really know how to do accounting well because no one taught them… so they kept it simple and now they want YOUR MONEY! It’s happened to me personally before. I got scammed over $1,000 because I trusted someone who said he could do my taxes for me online without Quick. He did my taxes fine, but then he kept asking me for more money to file my returns on paper (which is illegal). So what do you think I did? I told him to go F himself and never talked to him again.

4) Not understanding which transactions need to be inputted where 

QuickBooks is not difficult to use but it takes time to get used to. We always recommend new clients use QuickBooks for their bookkeeping needs since it simplifies the whole process and makes your life as a business owner much less stressful! 

The biggest mistake we see with our own clients does simply not understand which transactions need to be inputted where. For example: 

You go out and buy $240 of gas – you put this expense in your bank account register because you pay cash, and now you want to enter this transaction into QuickBooks so you can do your taxes at the end of the year. So what do you do? You look under Expenses > Bank Accounts > Cash on Hand (in QuickBooks) – WRONG!!! This is the WRONG place to enter your transactions. Transactions need to be entered in the correct categories – but they also need to match exactly what you put into your bank account register! 

5) Not knowing which type of business entity to set up 

This is a big one. Most people want to start off “incorporating” because it sounds better than being a sole proprietor BUT that’s the wrong way to do it. 

If you are still in business school or if you have any knowledge of basic accounting – then you know that expenses become tax deductions when they are incurred by your business. So if I own a McDonald’s and I buy a $1,000 calculator to use at my restaurant – this is an expense of mine as a business owner so it’s a tax deduction for me. The point being: you will pay LESS TAX if you have a sole proprietorship because your deductions are going to be wider!

Conclusion by Aron Govil:

The biggest mistake that I see is that people go into business without having any knowledge of accounting or bookkeeping. That’s why they are hesitant to spend money on QuickBooks – but the truth is, this software will actually SAVE you money in the long run by properly tracking your expenses.

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