7 Challenges Small Businesses Face Maintaining Accounting Records

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7 Challenges Small Businesses Face Maintaining
Accounting Records
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(No Transcript)
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Common Accounting Challenges Faced by Small
Business Entrepreneurs

• Managing Cash Flow

• Filing Taxes

• Updating Expenses Regularly

• Analyzing Your Overall Financial Record

• Sticking to the Old Bookkeeping and Accounting
  Methods

• Managing Payroll Efficiently

• Preparing for Unforeseen Expenses

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Managing Cash Flow
Even if your business is making a profit by
generating more revenue than it incurs in
expenses, managing cash flow is important for
success. While it is possible to find ways to
earn profits, focusing on cash flow will reflect
the true health of your businesss finance.
The cash generated from a businesss operations
depends on its core business activities such as
accounts receivable, accounts payable, and
inventories. So, to manage your cash flow
effectively, you need to pay attention to these
activities. You can consider replacing the
activities that no longer serve your purpose with
productive ones. Also, remember not to delay
receiving payments from customers. For this, you
may consider making your payment options slightly
more flexible by accepting electronic payments as
they are easily accessible.
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Filing Taxes
No matter its size, every business needs to pay
taxes on time. But many entrepreneurs are unaware
of the consequences of neglecting tax preparation
and the various regulatory limitations that lead
to significant losses. Tax preparation can be a
cumbersome task. From paying quarterly estimates
to filing taxes correctly, everything needs to be
done on time to avoid any penalty. Plus, you need
to stay updated regarding any revision or change
in tax regulations. As tax preparation is a
part of bookkeeping, make sure the bookkeeping
process is efficient and reliable. Otherwise,
inaccurate bookkeeping will lead to errors that
can lead to overpaying your taxes.
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Updating Expenses Regularly
Despite your busy schedule, you need to make time
to record all your business transactions
regularly. This helps you to keep track of all
your expenses and income and reduce any errors
such as miscalculations. So, make it a point to
record all your transactions as soon as they
occur. This also allows you to prepare an
accurate financial statement. With advanced
accounting software, you do not need to go
through the time-consuming process of recording
transactions and calculating them manually.
Choose one that suits your businesss needs and
you can get all the calculations done in a
fraction of the time.
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Analyzing Your Overall Financial Record
You may hire outsourced services or get in-house
employees to manage your bookkeeping and
accounting processes. But you cannot leave
everything up to them. Any successful
entrepreneur makes it a point to analyze their
business transactions regularly. So, you can go
through the accounting records and take your time
to understand what the figures are telling you,
assuming you have the ability to do so. Consider
how you can improve them and discuss it with your
accounting and bookkeeping experts. This will
also help you make sound financial decisions.
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Sticking to the Old Bookkeeping and Accounting
Methods
Many small businesses prefer managing their
account records using traditional accounting
methods like Excel spreadsheets. They also
believe that doing so is cost-effective and
reliable. Surprisingly, this is not the case.
Traditional accounting methods are
time-consuming as you need to input the data
manually. Plus, there is always a risk of making
mistakes which, left undetected, can adversely
affect your financial statements. Thats why it
is always advisable to use reliable cloud-based
accounting software. As it is automated, you can
save time and reduce human errors. Plus, it
offers various services at reasonable prices.
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Managing Payroll Efficiently
Apart from providing employees with their
salaries, managing payroll has various other
challenging tasks. These include proper tax
filings, timely payments, and ensuring the use of
advanced and up-to-date payroll software. This is
why establishing solid and accurate payroll
procedures right from the beginning is important.
It will help you minimize any accounting-related
challenges such as incorrect tax filings or
overdue payments. If you find it difficult to
manage your payroll responsibilities, consider
outsourcing them to third-party service providers
for a seamless process.
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Preparing for Unforeseen Expenses
Another common accounting problem faced by small
businesses is having unexpected expenses. Such
situations can happen due to many reasons,
including failing to keep track of receipts,
miscalculating financial statements, or not
keeping yourself informed and up to date about
tax regulations. One of the main causes of such
unforeseen expenses is trying your hand at
accounting without sufficient training.
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