Financial Accounting: The Costly Mistakes Beginners Make

For small businesses
and startups
, as well as larger, more established companies, financial accounting is and always will be a craft. At the same time, accounting is a crucial cornerstone for any business to operate successfully. It is therefore crucial that everything is properly recorded in your books and accounts. Even small errors can lead to unpleasant (and, above all, avoidable) consequences, at the latest during a tax audit. Before you know it, instead of the tax savings you were hoping for, you’ll find a demand for additional payment in your mailbox. To help you avoid some of the most serious beginner’s mistakes, we—as tax advisors in Düsseldorf
and Oberhausen—
will present our top five financial accounting errors below.

1. Paper clutter

We’ll start with the classic. Invoices, quotes, delivery notes, and contracts are “filed” in a large, unsorted pile in a box under the desk. Processing these documents is then simply put off until the week before filing your tax return. Now that deadline is fast approaching, and (as expected) you can no longer find important documents or match various invoices. To prevent this, you should be organized and systematic from the very beginning. The first step should be to consult your trusted tax advisor and discuss which documents are important for financial accounting and must be retained. Then, you need to properly store the important documents. As a general rule, all documents should be filed in a folder in a clean, orderly manner and in sequential order. And be careful! Be mindful not to punch holes through numbers or text. Ensure everything is complete. Ideally, you should also enter the entries directly or send the documents to your tax advisor.

2. Receipts on thermal paper

Related to the first point, we now turn to receipts on “thermal paper.” You’ve probably had your own experiences with the pitfalls of thin, lightweight receipts. You try to track down an older purchase receipt, only to find a gaping void where the invoice amount should be. The reason lies in the paper used for many receipts. If this thermal paper is left lying around for too long, the printed ink fades, leaving you with nothing but a useless piece of paper. To avoid this, you should therefore copy all receipts onto light-resistant paper or save them digitally as scans right away.

But even regular paper can fade! Therefore, you should especially avoid clear plastic sleeves, which contain plasticizers and thus cause the ink to fade more quickly.

3. You’re the Entrepreneur

Now that you’ve dealt with the first two points and your filing system looks great, the next question arises. How exactly does all this financial accounting work, and who should do it? To avoid blowing your budget right off the bat, you decide to first consult your best helper on the internet—we’re talking, of course, about the search engine Google. After spending a few minutes researching online, you decide to consider yourself an expert in the field from now on and to handle your next tax return yourself in just a few simple steps. So is it enough to do a quick bit of research on financial accounting? In a nutshell: It’s not enough! Financial accounting is a full-time job that’s constantly subject to new developments and changes in the field. So unless you happen to have several years of practical experience as a tax advisor, you should use your time more wisely. To avoid a host of pitfalls right from the start, it’s always advisable to hire an experienced expert. At our firm, our tax advisors in Düsseldorf and Oberhausen are happy to assist with financial accounting and will gladly save you a few gray hairs down the road.

4. Better late than never…

Life punishes them. You’ve probably heard this phrase far too often. But this credo also holds true when it comes to taxes and financial accounting. In business, there are always more important things that demand your attention as an entrepreneur. The multitude of forms and statements is no fun and is often put off indefinitely. But especially in the area of financial accounting, there are a lot of deadlines that absolutely must be met. Those who don’t stick to them will quickly receive avoidable letters from the tax office. It’s actually the same as it was back in school: if you only prepare sporadically in the last few hours, you won’t feel confident. So start early to submit everything on time. By the way, our tax advisors in Düsseldorf and Oberhausen know all the important deadlines inside and out. That’s another benefit of getting help from an expert.

5. Pulling the wool over the tax office’s eyes

Our final point should actually be at the top of this list, because it’s the one that most often draws negative attention: untruthfulness. Examples of such blunders include business lunches on Sundays and holidays or the latest gas receipt, even though the company car actually runs on diesel. As you surely realize, such tricks quickly draw negative attention from the tax office. Of course, there are business expenses that you can claim. But stay honest and always keep your books in order. Because tax fraud usually hurts the company’s bottom line more than the tax savings would have benefited you.

Conclusion

What can you take away from this article? Be careful with your documents. Take care of your finances and get help from an expert. Never try to deceive the tax office. To make life as an entrepreneur a little easier, we recommend that you contact a tax advisor of your choice and seek their support.

Our tax advisors in Düsseldorf and Oberhausen are always happy to assist you with their expert knowledge. Learn more about our services, especially our financial accounting services.