Small errors can result in huge inconsistencies.

Though unintentional, accounting errors can cause you a great deal of stress, time, and money. These small inconsistencies result in distorted projections, incorrect statements, and bad financial records.

That’s why we’ve outlined the top 4 accounting errors below and how you can prevent them from impacting your books.

1. Subsidy Errors

Subsidiary errors are simply transactions that have not been recorded correctly. Whether it’s inputting an extra 0 (for example 1000 instead of 100) or adding in a comma (1,000 instead of 10,000). These simple errors can be hard to spot and even more difficult to correct.

To correct subsidy errors, you will need to complete a bank reconciliation. A bank reconciliation essentially verifies every one of the numbers in your books against the numbers in your bank. In turn, helping to spot any inconsistencies.

It’s important that this process is completed at least once every six months. Otherwise, the longer you wait, the harder it is for you to find them.

2. Data Entry Errors

Another common error we see impacting business owners are data entry errors. These errors can have a significant impact on your accounting and completely throw it off.

Transposition errors are a common error we see when data entry problems occur. This means that the numbers have been reversed when inputting them into your books. For example, 3563 instead of 5365.

We also tend to see owners that round their figures when they input it into their books. Though this might not make a huge difference for small transactions or minor payments, overtime it definitely can.

Rounding errors can happen because of the type of accounting software you use or can occur due to human entry. Regardless, rounding figures (whether it’s up or down) can result in a series of mistakes that affect your bottom line.

3. Errors of Omission

An error of omission is another common issue plaguing small businesses and their books. This error occurs when you forget to input a transaction or payment. But, forgetting to input a sale, commission, or pay can cause you a headache come tax season.

This type of error is one of the hardest to spot. That’s because, you might have already misplaced the invoice, forgotten about the item, or destroyed any proof of payment you had.

But, one trick we find, is to check that your credit balances equal your debits. If they don’t – this likely means you’ve missed tracking a purchase somewhere along the line.

Although you can do this reconciliation process yourself, we always suggest bringing in a professional. Just our trained professional staff, having an unbiased third party overlook your books can help spot errors quickly and without prejudice.

4. Error of Principle

Also known as an ‘input error’, an error of principle occurs when a number has been input correctly, but not recorded in the right account. Again, this simple error can result in a series of inconsistencies. In turn, resulting in skewed books and projections.

Tracking down these errors can be hard work. You will need to check your trial balance to find the difference between your credit and debits. Once you have the difference, you will need to divide it by two and check your trial balance for that number.  If these two numbers do not match, it means that an error has occurred and a transaction could have been recorded in your debit instead of credit (or vise versa).

Regardless, having a professional review your books at least once every 6 months can prevent these errors from building up. Plus, they can help set you up for future success by ensuring that all your transactions are recorded and your projections are sound.

If you’d be interested in learning more, or knowing what services would benefit you, give us a call at 407-328-5001.

Image: Unsplash