When running a business in the Philippines, one of the things that can go wrong and escalate rapidly is accounting. After all, not everyone is gifted with a good grasp of numbers. Even if you outsource the job, your accountant may end up with the wrong receipts or deal with books of accounts with erroneous entries. Even using accounting software to make bookkeeping easy doesn’t mean you can eliminate mistakes.
Although some accounting mistakes are minimal with no adverse consequences, others can have a severe impact, resulting in filing incorrect paperwork and inadvertently misrepresenting the company’s financial health with the BIR. This article tackles the most common accounting errors so you can avoid them.
Failing to Reconcile on Time
As a business owner, you must reconcile accounts like bank and credit card statements at least once a month. This means double-checking and auditing if the account balance listed in your books is accurate. It enables you to identify issues before they get out of hand. The advantages of doing so are the following:
- Seeing how much cash on hand or credit reserves are available for use
- Ensuring there’s no fraudulent activities
- Catching errors in bank and credit card transactions
- Knowing if your customers paid on time or checks bounced
Errors in Data Entry
One of the most common accounting mistakes in the Philippines is human error concerning data entry. To mitigate this issue, enforce procedures that ascertain correct entry and identify problems ahead for easy correction. Avoid this problem by implementing the following:
- Realistic Expectations: A person can only do so much work. When there’s excessive pressure, mistakes happen. Instead, set realistic goals that can be met within a reasonable timeframe.
- Conduct Audits: Conduct regular reconciliations and quality checks with a fresh set of eyes. Always ask your team to review the work and let them know someone will be doing a final audit to keep them on their toes.
- Invest in Training: Sadly, it is common practice for SMEs in the Philippines to employ one worker who multitasks without sufficient training. Unfortunately, when it comes to bookkeeping and accounting, training is necessary for precision and accuracy. Train your team regarding the correct accounting procedures.
Forgetting to Document
One of the Many BIR problems and solutions is SMEs losing valuable tax deductibles because they fail to document business expenses. Bear in mind, the BIR will not accept your tax deduction if you do not provide supporting documents. Make sure you’re compliant by enforcing the following:
- Set Rules: Make sure you have a policy wherein expense reports or employee reimbursements will not be paid unless accompanied by corresponding receipts.
- Leverage Tech: You can use cloud-based storage like GoogleDrive to reduce lost or missing documents. You can also rely on expense report software like Monefy or Expensify to make tracking and creating reports much easier.
- Bill Vendors: Make it a rule to never pay vendors until they submit a bill. This is the only way you can stay on top of your necessary documents.
Being Lazy with Bookkeeping
When Pinoy business owners try to DIY accounting and bookkeeping, they succumb to laziness. That’s not surprising at all because as a businessman, you have so many things on your plate and issues pulling you in different directions. Now is the time to cease stockpiling receipts in a drawer or shoebox. Avoid mistakes by setting up practices like scheduling a specific time of day to work on your books. Doing it a little at a time, like breaking it to an hour or two each day, will prevent pressure build-up and burnout.
Not Asking for Help
If you cannot find time to settle your records and paperwork, outsource the work so you can focus on your business. Bear in mind, it’s impossible to do it all solo, especially when you’re busy with product development, marketing, and answering customer queries. If you delay seeking help, you will create an even bigger mess. Imagine paying the wrong tax dues and being slapped with stiff penalties.
Lacking the Updated Information
Finally, most accounting errors in the PH are due to ignorance, especially since business tax laws are constantly modified. Ask yourself how well-versed you are with tax laws? Only when stay abreast with revenue regulations can you record and pay the correct taxes. For instance, business owners also have to pay attention to:
- Filing the Summary List of Sales and Purchases every quarter
- Submit Taxes Withheld on Compensation for each employee
- Declare the based amount of tax for Official Receipts
There are many other details you must remember. Remember, implementing the best business practices can help you prevent any future mistakes and protect your company’s financial health. If you feel overwhelmed, it’s time to outsource the work. Call our team of CPAs for a free 30-minute consultation.