As a Woodland Hills accountant, I have often had clients come to me only when a small preventable mistake has already resulted in a big cost. Business accounting has its own set of challenges, but few challenges can be more devastating than errors and fraud. For any firm, cash is generally a concern, so even slight errors may lead you to make poor financial decisions that result in significant losses. Unfortunately, small but devastating errors are more common than you’d imagine. Don’t surrender to the bad habits of others; you can avoid these common mistakes by educating yourself and hiring a CPA to put preventative measures in place.
Unfortunately errors and fraud are fairly common in small companies. In fact, according to the Association of Certified Fraud Examiners (ACFE), over 30% of all fraud takes place in small firms. What’s worse is the price these companies pay for fraud; the median fraud loss at these firms was $150,000. In most cases the fraud was only discovered by accident or by a tip from an outside source, so the majority of these businesses did not have preventative or monitoring measures in place.
Even in larger firms where the risk for fraud is low, minor errors can be just as detrimental. A single unrecorded payment from a customer can result in hefty penalties for unpaid sales taxes. Unfortunately such errors are more common than you’d think. Indiana University recently published a study showing that 60% of accounting errors are the result of simple bookkeeping mistakes or misunderstandings.
What makes small businesses so vulnerable to fraud and accounting errors? Frequently, these companies may have only a small bookkeeping staff, or the office manager may have to do double duty as the bookkeeper. When you have only one person taking care of your bookkeeping needs, and no one to double check the work, mistakes are easily made. Furthermore, when you only have one qualified person performing so many roles, it’s unlikely that a financial audit will ever be performed to catch the mistake before it becomes an issue.
Although you, or someone at your firm, may be able to perform certain accounting activities, it’s safest to hire a dedicated CPA to provide business planning services. Business accounting can get very complicated, especially if your company experiences sudden growth, and you don’t want to jeopardize that growth with inadequate planning. The cost to hire a trained accountant to consult with you will generally be covered many times over given the many costly mistakes you’ll avoid. If you’re looking for a Woodland Hills CPA, please give our office a call at 818-593-6777, and we’d be happy to help you address these and other challenges your business may be facing.
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