3 Ways To Avoid Costly Administrative Mistakes

It may sound simple to run a small business, but those who have done it know how difficult it can be. Administrative mistakes can lead to lost time and financial losses, regardless of whether you are too busy to pay attention to every detail or lack knowledge. Companies that don’t comply with their workers’ compensation insurance obligations could face penalties up to $10,000 in some states.

You don’t want administrative errors to eat into your profit margins. You have to make confident that you have the right processes in place and find ways to correct your mistakes. To get it fixed the first time, there are three key steps.

1. Know what tax you will pay.

When you own a business, taxes can become more complicated. It is essential to seek professional advice regarding all tax and accounting matters. For example, according to OnPay’s report On the State of Small Business, in 2020, 52% of businesses used the government’s Paycheck Protection Program Loan (PPP). The federal CARES Act provides tax credit and deferrals to nearly the same number of companies.

But here’s the problem: Many business owners were not sure how their choices would affect their tax returns. Yes, many outlets proclaimed the PPP loan’s benefits. However, the Tax Foundation pointed out that some states treated “forgiven loans” as taxable income. It is easy to see how tax situations can become complex in these circumstances. Avoid big surprises at tax time by using high-quality automatic accounting software and working closely with an accountant.

2. Make sure to mark your income sources appropriately

Like most business owners, many channels funnel cash to your bank accounts. One funnel could be generated from individual sales on your e-commerce website. An annual membership subscription could provide another channel. While both streams count towards revenue, you should designate them separately. If you do not, your marketing dollars could be misallocated.

Let’s say your balance sheet shows that $100,000 was earned last quarter. Your marketing seems to be working. But what you might not notice is that only $1,000 of your marketing dollars came from memberships. You should adjust your marketing dollars accordingly. It is crucial to remember that looking at your income individually can be very helpful. It does not tell the whole story. It would help distinguish between the income streams to make wise money decisions.

3. Be on top of lousy Debt.

Bad Debt can be a problem, primarily if it is not known. Bad Debt generally comes from customers who fail to pay their bills on time or at all. You can write off a part of your bad credit, but it is better to collect on it. You will need to plough deep into your Debt to really reduce it.

Let’s assume you’re one of the 93% of organizations that are experiencing problems with late payments. According to TSI research. It’s a smart thing to think about the characteristics that late payments share. Are late payments more common with repeat customers or first-time customers? Are late payments more likely to be associated with purchases exceeding a certain amount of money? It’s possible to identify the times when late payments are most likely so that you can come up with innovative methods to get your money faster. Simple reminders of payments could help you reduce the financial loss.

It’s not uncommon to spot a quarter as you walk down the street. Entrepreneurs might have access to thousands, if not hundreds, of unfound money. Examine your documents, workflows, and spreadsheets. A little digging beneath the surface may reveal a small treasure in reclaimed profits.

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Samatha Vale
Samatha a senior writer for HC's entertainment team. She is an entreprenuer, mother and an excellent writer. She's also an avid reader, music enthusiast and all around inquisitive person - which is just a nice way of saying she's nosy.

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