If you’re preparing your company’s taxes this year, here are the top mistakes to avoid.
With the tax season officially underway, there are many businesses that are discovering that they didn’t keep accurate enough records to legitimately claim all the deductions they are entitled. Accounting software for enterprise businesses is one of those expenses that pays for itself in the long run. In most cases, a business can even deduct the cost of financial software on a tax return. Before jumping head-on into taxes, it’s important to understand the accounting mistakes that cost businesses around the country billions each year.
Manually Entering Data Leaves Room for Error
It’s important for any accounting software to have basic functionality that automatically enters transactions into the ledger. Manually entering transactions is one of the biggest mistakes a company can make. Manually entering a transaction leaves room for errors and omissions. The occasional error may happen to any business, but it’s important to have a system in place to catch errors before they result in audits or penalties.
Taking Accounting Files Home
Mobile devices make it easy to track company finances on the go. However, spreadsheets and plain text ledgers make data easy prey for thieves and hackers. Accounting software ensures that employees can’t just take a spreadsheet of important company information home with them, mainly because it lives in the cloud. Making it a policy to not save company financial information to personal devices can help to protect the company’s sensitive data and reputation.
Not Securing Your Wi-Fi Network
Companies are increasingly moving to wireless methods of networking and connecting devices. During tax season, thieves are on the lookout for crucial information that can be used to defraud a company. Keeping a secure Wi-Fi network with a strong password and changing that password regularly can help protect a company’s information. I’ve personally seen companies that work on a public connection lose valuable financial and customer data because the company failed to secure a connection.
Changing tax law is extremely difficult to keep up with. A company should hire an accountant to complete its taxes, but even with the aid of an accountant mistakes can still happen. Using accounting software that automatically calculates this information can protect a company from these mistakes. Any company that needs to calculate depreciation from previous years should definitely be using tax software. The small cost of the software more than pays for itself by reducing errors and accounting blunders.
Closing the Books Too Soon
A company that uses accounting software usually doesn’t fall into this trap. An electronic system makes it easy to see if any data is missing by downloading information from payroll, bank accounts and customer invoices. Asset-intensive industries may fail to account for all assets, which can result in years of incorrectly prepared tax returns. When this information is caught, it can be extremely time consuming and costly to correct.
State and city tax regulations aren’t always the same. Companies that don’t use accounting software are at greater risk of making these mistakes. It can be difficult to keep up with all the changes, especially if a company conducts business in more than one jurisdiction. Incorrect calculations can result in a company paying too much, or not paying enough in taxes each year. There are often local tax incentives that can save a business money, but the company may lose these incentives unless these incentives are accurately tracked and applied.