The Senior Entrepreneur's Guide To Avoiding Accounting Pitfalls When Starting a Business

Retirement doesn't always mean the end of your working life. In fact, some seniors see it as a golden opportunity to become entrepreneurs and start their own business.

However, if you’ve spent most of your life working for someone else, you might not know everything about running a business. Especially not the accounting side. The good news is, you can easily learn and acquire the skills that will help to make your venture a success.

If you want to find out more about common accounting pitfalls and what you can do about them, keep reading. This handy guide for senior entrepreneurs explains it all.

Starting With Accounting Too Late

One of the most common accounting mistakes that many new entrepreneurs make is waiting too long to start with their accounting. Your new venture can benefit in various ways from clear books. In addition to gaining a wealth of information about your enterprise from the outset, you should also find it easier to spot areas where you can increase or reduce spending, and to spot inefficiencies that you can improve.

You also need to be able to prove where your costs are going if you want to claim tax relief. You need to get your accounting in order from the start, as you need to be able to prove where your costs are going.

Not Staying On Top of Paperwork

This goes hand-in-hand with waiting too long to start accounting. There’s no overemphasizing the importance of keeping reports and ledgers up-to-date.

If you keep all your receipts in a shoebox and forget about them, you’ll find accounting and audits become far more difficult. Digitize and store records, such as receipts, bills, invoices, bank statements, and tax returns, for at least three years. Do this right from the start.

Not Organizing Documents Sequentially

Not organizing documents sequentially is almost as bad as storing everything in a shoebox. Not arranging your books in an orderly way could be disastrous, as you might find it much more difficult to make sense of things when it comes to doing your books or submitting your tax return.

You will find it much easier to keep track of when to pay bills, set up an effective follow-up strategy for outstanding invoices, assess your new business's performance, and predict and resolve cash flow issues if your invoices are numbered sequentially.

Storing All Your Data In Spreadsheets

Spreadsheets can be a valuable tool for your new enterprise. But they’re not the best solution for all your business’ data storage needs. Especially when it comes to accounting. Spreadsheets require a manual process that’s complex, tedious, repetitive, and time-consuming. They can also lead to expensive human errors, reduce your prospects of collaboration, and put you at risk of losing data.

Using one or more of the many online account systems and automation tools available can save you many headaches. With the right accounting software, online systems, and other data storage tools, you and your start-up can benefit from integration into the IRS for automated filing and compliance, easy professional invoicing, and direct bank feeds that reduce or eliminate manual entry and errors.

Not Making Electronic Payments

Not paying electronically is another common accounting mistake. Keeping track of manual payments can be difficult, especially when you have many invoices and receipts to look through. Make payments using electronic means, such as electronic transfer or your debit or credit card, to ensure that your bank statements include a permanent record of the transaction. These records include the date, the recipient’s name, and the amount of money you paid them.

In addition to reducing the chances of human errors creeping in as well as the need for human intervention, the records you create when you make electronic payments also eliminate the risk of losing important financial records.

Not Using Separate Bank Accounts

Using a single bank account for personal and business reasons can make it difficult to keep records, and it could be the downfall of your new venture. You should treat your business as a separate entity from the outset.

When starting a new business, your first step should be to open a business bank account. Once the account is open, add the details to your printable invoice template so that there’s no confusion about which account clients will pay to. Thereafter, run all your business’ income and expenditure through this account.

Not Keeping Track of Tax Expenses

Not keeping track of tax expenses is an accounting pitfall that older entrepreneurs are better off avoiding. The last thing you want is to spend hours looking over manually compiled tax submissions, trying to find a human error that keeps you from submitting your return.

Keep a regularly updated record of expenses that you can claim from the IRS, and all your tax filings up to date. Consider using an automated solution to reduce the need for manual data entry, streamline compliance, and change the way you make submissions.

Using Credit Cards For Small Expenses

Using your business credit cards for small expenses is another accounting pitfall you should avoid. Apart from making it difficult to keep helpful records due to the amount of work involved in reconciling company credit cards, you’ll find it hard to track payments in real-time.

If you need to give employees cards for making payments, it’s better to give them debit cards. With debit cards, you can set limits and spending rules, you know who made payments, and you can monitor their spending in real-time using an app.

Not Tracking Payroll

Not keeping track of payroll is a serious accounting mistake for senior entrepreneurs, whether you have one, 10, or 100 employees working for you. Keeping track of payrolls is tedious and difficult without the right tools. However, if you invest in a decent payroll management system, you can easily keep track of hours worked, withhold taxes and other deductions, calculate wages, print and deliver checks, and pay taxes.

What’s more, the right systems manage almost every aspect of paying your employees and filing employment taxes.

Make the Best Decisions For Your New Business

Now that you know about the accounting pitfalls to avoid as an older entrepreneur, you can make the best decisions for your new business.

Remember, start with accounting from the beginning, stay on top of paperwork, and use the technological and online tools available to get your venture off to a good start.