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Two simple accounting mistakes and how to overcome them

by , 23 June 2014
When it comes to your business, a simple accounting mistake can sink you.

That's why you need to be on top of your game and leave no room for mistakes.

To help you, check out the two common accounting mistakes below that business owners make and how to overcome them.

If you're guilty of these two accounting mistakes, here's how to fix them

Mistake #1: Negative inventory

Not all businesses have inventory. But a common mistake for those that do is accidentally recording the sale of inventory to a customer before it's received, says accounting expert, CP Morey.

This means, it's on the shelf, but you don't have it yet on your accounting system. This can cause havoc on your financial statements.

Luckily there's a quick fix.

Solution: Scan your inventory listing and investigate any items that show negative quantities.

We're not done. There's one more mistake you need to be aware of.

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One more accounting mistake you must know about and how to deal with it

Mistake #2: Misclassifying expenses

When you're in a rush it's easy to pick the wrong expense description or forget to classify an expense altogether. The bad news is that if you don't assign that rental payment to the right category, the reports you generate from your accounting system may not properly reflect what's actually happening in your business, warns Morey.

Solution: To overcome this mistake, scan your expenses periodically to make sure the data appears reasonable. For example, if rental expenses drop significantly in one month, it might be a classification problem.

The good news is that, nowadays many accounting systems allow you to automatically assign categories to specific vendors as a way to minimise errors. So make sure you have a good accounting system too.

There you have it. Now that you know all about the common accounting mistakes, make sure you avoid them. If you need more information on how to overcome accounting mistakes, ask our experts at the Accounting & Tax Club.

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