COMMON ACCOUNTING MISTAKES
Many small businesses focus heavily on sales and operations but often overlook proper accounting practices. These mistakes may seem small at first, but they can lead to serious financial problems, cash flow issues, and tax penalties in the long run. Below are some of the most common accounting mistakes small businesses make—and why they should be avoided.
1. Mixing Personal and Business Expenses
One of the biggest mistakes is using the same bank account for both personal and business expenses. This makes it difficult to track actual business costs and can confuse audits or tax filing. Separating personal and business finances helps maintain accurate records and protects the business owner legally and financially.
Example: Paying personal groceries or family expenses using the company bank account, making it hard to identify actual business costs during audit or tax filing.
2. Poor Record Keeping
Failing to keep proper receipts, invoices, and payment records can lead to missing expenses and inaccurate financial statements. Without clear documentation, businesses may also lose the ability to claim tax deductions. Good record-keeping ensures transparency and simplifies accounting and auditing processes.
Example: Losing supplier invoices or not keeping receipts, resulting in expenses not being recorded and tax deductions being missed.
3. Not Tracking Cash Flow Properly
Many small businesses focus only on profit and ignore cash flow. A business can be profitable on paper but still face cash shortages if inflows and outflows are not monitored. Regular cash flow tracking helps businesses meet obligations such as salaries, rent, and supplier payments.
Example: Showing profit in the accounts but not having enough cash to pay salaries or rent because customer payments are delayed.
4. Incorrect Expense Classification
Classifying expenses incorrectly—such as recording capital expenditure as revenue expenditure—can distort financial results. This leads to inaccurate profit figures and may cause tax reporting issues. Proper classification ensures financial statements reflect the true financial position of the business.
Example: Recording the purchase of office equipment as a normal expense instead of capitalizing it, causing profit to appear lower than it should be.
5. Missing Tax Deadlines
Late tax submissions or payments can result in penalties and interest charges. Small businesses often overlook deadlines for income tax, withholding tax, or other statutory payments. Staying organized and setting reminders can help avoid unnecessary costs.
Example: Late submission of income tax or withholding tax leading to penalties and interest charges.
6. Not Reconciling Bank Statements
Ignoring bank reconciliations may result in undetected errors, duplicate payments, or fraud. Regular reconciliation ensures that accounting records match bank records and helps identify discrepancies early.
Example: Duplicate payments to suppliers or bank charges not recorded because bank statements are never reconciled.
7. Trying to Do Everything Without Professional Help
Some small business owners attempt to manage accounting without sufficient knowledge. While this may save money initially, mistakes can be costly later. Seeking advice from an accountant ensures compliance and provides valuable financial insights.
Example: Preparing accounts without proper accounting knowledge, resulting in errors that need costly corrections later.
𝐕𝐢𝐬𝐢𝐭 𝐮𝐬
Wisma 𝐓𝐇𝐊, 41, Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru
Wisma 𝐊𝐓𝐏, 53 Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru
𝐓𝐇𝐊 (𝐒𝐞𝐜𝐫𝐞𝐭𝐚𝐫𝐢𝐚𝐥, 𝐀𝐜𝐜𝐨𝐮𝐧𝐭/𝐏𝐚𝐲𝐫𝐨𝐥𝐥, 𝐀𝐝𝐯𝐢𝐬𝐨𝐫𝐲)
A licensed secretarial firm in Johor Bahru providing fast reliable incorporation, secretarial services, corporate compliance services, outsource booking, accounting and payroll services to clients
Website www.thks.com.my
Facebook https://bit.ly/42XKWsk
Instagram https://bit.ly/42Uqf0e
Linkedin https://bit.ly/3EH885M
𝐊𝐓𝐏 (𝐀𝐮𝐝𝐢𝐭,𝐓𝐚𝐱, 𝐀𝐝𝐯𝐢𝐬𝐨𝐫𝐲)
An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients
Website www.ktp.com.my
Instagram https://bit.ly/3Rko5kN
Linkedin https://bit.ly/3sapf4l
Telegram http://bit.ly/3ptmlpn
𝐊𝐓𝐏 𝐋𝐢𝐟𝐞𝐬𝐭𝐲𝐥𝐞
An internal community for our colleagues on work and leisure.
Tiktok http://bit.ly/3u9LR6Q
Youtube http://bit.ly/3ppmjyE
Facebook http://bit.ly/3ateoMz
Instagram https://bit.ly/3jZpKLo
KTP 𝐂𝐚𝐫𝐞𝐞𝐫
An external job community on vacancy in Johor Bahru for interns, graduates & experienced candidates.
Instagram https://bit.ly/3u2PxHg
Facebook http://bit.ly/3rPxz9o
#KTP #Thk
#Myktp
#ktplifestyle
#ktpcareer
#24years
Malaysia