Great article for small business owners that drives home a number of the the viewpoints I’ve shared in the past. – T.C. Wright
Three Common Accounting Mistakes
Expert advice and lessons learned from financial missteps of small-business owners.
By Lisa Girard
Tax time isn’t the only time business owners should review their accounting practices. Experts say small-business owners often make seemingly simple accounting mistakes that — which at their most extreme — could mean the difference between a good and bad fiscal year. Here are three common missteps entrepreneurs make and the lessons you can learn from them.
Mistake No.1: You treat sales as revenue before the product or service is delivered.
Stuart Reisch, co-founder of Transform, a company that makes custom storage units, learned this the hard way after unwittingly counting deposits as income his first year in business in 1999. The New Rochelle, N.Y.-based company had $1.2 million in expenses versus about $1.4 million in sales, resulting in what looked like a $200,000 profit. However, $200,000 worth of products that were sold weren’t actually installed until January of the next year. As a result, Reisch ultimately had to revise the company’s financials and realized the business had only broken even — not earned a profit after all. He then decided to temporarily halt plans for growth.