Running a Small Business – And Forgetting About Accounting

Running a small business is a bit like wearing a dozen different hats all at once – and accounting all too often gets left on the shelf until something goes horribly wrong. Problem is, these small accounting mistakes can quickly spiral out of control and lead to cash flow problems, tax penalties, and some pretty poor decision making.

At Odoni Partners LLC, we work with all sorts of small businesses and consistently see the same accounting pitfalls come back time and time again to trip up their owners. The good news is that – most of the time – these mistakes are completely preventable, if you just get the right systems, guidance and support in place.

Below are the most common small business accounting mistakes and how to avoid them.

1. Blending Personal and Business Finances

One of the most common and costly mistakes small business owners make is to get their personal and business finances all mixed up. Using your personal bank account or credit card for business expenses may seem like a convenient option, but it creates all sorts of problems – the most obvious being confusion and a real nightmare when it comes to trying to do your bookkeeping. And on top of that, it raises a big red flag when it comes to tax reviews and audits.

How to avoid it:

• Open a separate bank account and credit card for your business – it’s worth the effort, trust us.
• Pay yourself through a payroll system or owner distributions – not just whenever it suits you.
• Keep track of all your business expenses clearly and consistently.

At Odoni Partners we can help your business set up a system for keeping your finances nice and separate – which will save you a whole lot of headaches down the line.

2. Poor or Inconsistent Bookkeeping

Good bookkeeping is really the backbone of healthy financial management, but so many small businesses struggle to keep on top of their record keeping – either because they’re too busy to bother, or because they’re relying on old, out of date systems that just aren’t up to the job. Missing entries, duplicate expenses, or old records can all distort your financial picture and lead to tax time headaches you really don’t need.

How to avoid it:

• Get into the habit of regularly recording your transactions – it’s not just about tax time any more.
• Get a decent accounting software system that really suits your business’s needs.
• Make sure you reconcile your bank and credit card accounts on a regular basis.

Our team can provide the bookkeeping oversight and support you need to keep your records accurate, up to date and safe from any potential problems.

3. Misclassifying Expenses and Income

Getting the right labels on your expenses and income is a right old problem that many small businesses struggle with. Misclassify something – and you could be looking at over-stated profits, under-stated expenses, or even lost tax deductions – which can really cost you.

How to avoid it:

• Use a chart of accounts that really makes sense for your business.
• Take some time to understand what’s a capital expense and what’s an operating expense.
• Check your expense categories regularly to make sure they’re accurate.

We can review your accounts to make sure everything is properly classified and your financial statements really do give a true picture of your business.

4. Payroll Errors and Compliance Issues

Getting payroll right is one of the most complex areas of small business accounting – and it’s just not worth taking the risk of getting it wrong. Errors in tax withholding, missed deadlines, or misclassifying workers (employee vs. contractor) can all lead to serious penalties and even more serious legal trouble.

Common payroll mistakes include:

• Getting tax withholding wrong\
• Missing payroll tax deadlines\
• Messing up overtime or benefits\
• Getting worker classifications wrong

How to avoid it:

• Get a compliant payroll system or use a professional payroll service.
• Stay on top of federal, state, and local payroll tax rules.
• Double check worker classifications – it’s really worth getting it right.

At Odoni Partners we can help you set up a correct payroll system and get back on track if you’ve made some mistakes.

5. Ignoring Cash Flow Management

Profit doesn’t always mean you’ve got enough cash in the bank – and without proper cash flow tracking, you might find yourself caught short when it comes to tax payments, vendor bills, or even payroll. And let’s face it, without some cash in the bank you’re not going to be running a business for long.

How to avoid it:

• Keep an eye on your cash flow on a regular basis – it’s not all about making a profit.
• Forecast your expenses and tax liabilities well ahead of time.
• Set aside cash reserves for when things get slow or unexpected expenses pop up.

Our advisors can help your business get to grips with its cash flow patterns and develop a plan to keep the bank balance looking healthy all year round.

6. Failing to Plan for Taxes

Waiting until tax season to think about your taxes is just a recipe for disaster – unless you’re prepared to shell out big time for penalties and fines. Without some forward planning, you’re going to miss out on all sorts of tax deductions and credits – and end up stuck with a bigger tax bill than you need to be.

How to avoid it:

• Estimate your taxes throughout the year and adjust as your income changes.
• Take advantage of all the tax deductions and credits available to you.
• Coordinate your tax planning with your business growth plans.

At Odoni Partners we take a proactive approach to tax planning – to help your business reduce its tax liabilities safely and correctly.

7. Inaccurate or Delayed Financial Reporting

Your financial statements are pretty much your most important decision-making tools – but if they’re not up to date or accurate, you’re flying blind. And that’s a recipe for disaster.

How to avoid it:

• Get into the habit of generating monthly financial statements (income statement, balance sheet, cash flow).
• Review your reports regularly and ask questions if the numbers don’t add up.
• Make sure your reports are all accurate and reconciled.

Our team is here to help you make sense of your financial statements and use them to make informed, strategic decisions.

8. Not Seeking Professional Guidance Early

It’s all too common for small business owners to not seek help until a problem has already blown up and become a major issue. By then, it can take a lot of time and effort to sort out the mess – and even then, there’s no guarantee it will come out right.

How to avoid it:

Bring in an accounting partner right from the start – even if business operations are pretty straightforward.

• Get regular meetings with your accountant to check in on your finances – not just their annual tax audit session.
• Get some professional advice before making any big financial decisions.

Odoni Partners LLC works like a built in member of your team, giving you guidance all year round to catch any potential problems before they become disasters.

How Odoni Partners LLC Gives Small Businesses the Advantage They Need

We know what it’s like to be a small business owner at Odoni Partners LLC, because we’re in the trenches alongside you every day. That’s why our accounting services are designed to fix the present and set you up for a smooth future through:

• Good honest bookkeeping that’s on time
• Payroll and compliance help – because nobody likes a headache
• Thinking ahead with tax planning and preparation
• Breaking down financials in a way that makes sense to you
• We’ll stay in touch as your business grows and changes

Our goal isn’t just to have clean books – its about making it easy for you to run your business – with confidence that you’re on top of the finances and compliant.

Don’t Let Financial Worry Hold You Back – Build with Confidence

Making a mistake with your accounting can be a real disaster – but the good news is most of the time it’s easy to avoid. With the right systems in place and a good accountant by your side – you can focus on taking your business to the next level.

Get in touch with Odoni Partners LLC today to see how our crew of experienced accountants can help fix up your accounts and give you the financial foundation your business needs to thrive.