3 Accounting Mistakes Entrepreneurs Must Avoid Early!

When starting a business, it is unavoidable to often hit a snag, especially because of neglect in the field of financial accounting, which is the reason why many people fail to start a business. The main cause of the problems in the above problems will affect the development prospects.

Moreover, many start-up entrepreneurs have some misunderstandings and incorrect notions about “accounting”, and even think that accounting is a dispensable existence for company development. In response to these problems, the whole article will summarize and explain several accounting mistakes most likely to be made by regular entrepreneurs to help new entrepreneurs avoid similar situations.

The company’s capital is not accurate, and it is difficult to separate company and private use

When starting a company, if it is a partnership business, you must try to avoid the problem of false capital, which is easy to cause shareholder disputes. The general capital injection procedure seems simple, but many people will transfer the fixed or full amount of the company’s capital to a private account after setting up a company.

Don’t think that a large enterprise can mix public and private funds. In addition to the suspicion of tax avoidance and obstruction of tax assessment, it is more likely to increase the suspicion of assisting money laundering and violate the commercial and company regulations.

If the company wants to introduce more shareholder funds under the above circumstances, it should be calculated according to the capital amount specified in the company’s articles of association, and the procedural principles should be strictly followed to prevent false bank numbers, damage the rights and interests of shareholders and creditors, and cause more problems.

The account is not classified clearly, and it is easy to become a financial strait

Secondly, entrepreneurs tend to ignore the importance of accounting classification, and only record the “running account” without the concept of income statement, balance sheet and cash flow statement. In addition, the company has not formulated an accounts receivable policy to quantify customer payments, and it is easy to cause more confusion in the accounts due to issues such as credit and collections.

Since the running account only compiles income and expenditure, manages only a small amount of financial information, and does not estimate the budget, cost allocation, income, profit, etc., it is difficult to grasp the real financial situation of the business, and profits and losses are not 100% sure.

As a result, the company’s turnover may be good, but the capital turnover will be ineffective. Under the premise of a low understanding of operating funds, it is easy to declare bankruptcy without deficit.

Inaccurate calculation of accounts and miscalculation of development budget

Due to the lack of professional accounting and bookkeeping, the proprietor may not have time to confirm and recalculate the accounts while in the daily operation, resulting in accounting errors, which will affect the subsequent calculation of financial interests, not to mention the preparation of the correct profit and loss statement. The conclusion is still that the true financial status of the business cannot be determined, and whether it is a loss, or a profit can only be estimated.

In the absence of these financial data, it is difficult for the proprietor to adjust the services/products provided from the accounting data to meet the changing needs of the customer base, nor can it be used as a guide to formulate the next business strategy. be slow.

In many innovative teams lacking accounting specialties, it is more likely to underestimate development costs, and the team accumulates a lot of unpaid salaries, etc., causing the business to miss the budget. Conversely, there may also be employers who in practice pay themselves large amounts of salaries, but this may have consequences such as worsening financing conditions.

The above information is for reference only. If you have any questions about entrepreneurship and accounting, we welcome your inquiries.