- 15
- April
Imagine you're working at full capacity—selling, serving your customers—but despite all that effort… profits aren’t increasing, and reports are unclear. Often, the issue isn’t with marketing or operations, but with small accounting mistakes that keep happening without you noticing.
In this post, we’ll reveal the most common accounting errors businesses make, and how you can avoid them.
1- Recording Revenue Before It’s Earned
Some businesses record revenue as soon as a contract is signed or an order is placed, even if the product hasn’t been delivered or the service hasn’t been provided yet. This violates the accrual principle and can temporarily inflate profits, only to result in losses later.
- Solution: Tie revenue recognition to the actual delivery of the product or completion of the service.
2- Not Reconciling Bank Accounts Monthly
Delaying bank reconciliations opens the door to errors, fraud, or duplicate entries.
- Solution: Use an accounting system that supports automatic or easy bank reconciliation.
3- Ignoring Accounts Receivable Reconciliation
If you don’t follow up with customers who are late on payments, those invoices can turn into bad debts.
- Solution: Monitor aging reports regularly and enable automatic reminders or integrate with your collections team.
4- Treating Capital Expenses as Operating Expenses
Some businesses record large equipment purchases as direct expenses instead of capital assets to be depreciated.
- Result? Profits are misrepresented, and reports become misleading.
- Solution: Properly classify fixed assets and activate a depreciation mechanism.
5- Not Updating the Chart of Accounts
Using an outdated or disorganized chart of accounts leads to poor categorization and distorted reports.
- Solution: Regularly review and update your chart of accounts based on your business's evolving operations.
6- Ignoring Provisions
Some companies don’t record provisions for damaged inventory or doubtful debts.
- Result: Artificially inflated profits.
- Solution: Periodically assess your assets and create realistic provisions.
7- Relying Solely on Excel
Excel is great for analysis, but it’s not built for documentation, auditing, or real-time reporting.
- Solution: Use a comprehensive accounting system that gives you accuracy and flexibility.
How Can Sutumatic Help You?
📊 Sutumatic is designed to reduce human error:
- Automatic alerts for incomplete journal entries
- Smart bank reconciliation
- Accurate account categorization
- Real-time reports that reveal any discrepancies
