Learn about common accounting system errors and how to avoid them.

Even with all the technology available today, mistakes can still happen.  Some mistakes can have a minimal effect on financial statements and can be easily corrected.  However, other mistakes are more serious and could significantly impact decision making and misrepresent a business’s true financial health.

The following are some common accounting system issues that arise and suggestions on how to avoid them.

 Not Doing Timely Reconciliations

Monthly processes to review common accounts such as bank and credit cards for errors, is vital to keeping a true and accurate picture of how things are going. The reconciliation process helps identify problems before they can get too big, making quarter and year end much easier.  Reconciliations help a business:

• Calculate accurately how much cash/credit is available
• Check for fraudulent activity
• Catch bank errors (They do happen!)
• Know if any customer payments have missed being entered or were rejected from the bank

Errors in Data Entry

Errors in data entry are probably one of the most common causes of incorrect reporting and profit loss. From a simple transition error to an misallocated expense, humans make mistakes.  While a business can’t prevent all mistakes, having processes in place to ensure errors are identified and corrected will go a long way to ensuring accuracy is maintained.

Some ways a business can mitigate these risks are:

• Maintaining a healthy work balance without overloading staff There is a limits for data entry a single person can do in a day.
• Set up review processes, which is common when posting is required.  Ensure there are other sets of eyes on the books by separation of work.  For example, one person does the data entry while another approves and posts. As a business owner or manager, make sure you know how to use the accounting system to review work and run reports.
• Training, training, training.  It pays to have someone knowledgeable and well trained.  Invest in your company’s financial health by making sure you are keeping your staff well trained on process and expectations.  Knowing how your accounting software platform was designed to work can be very beneficial for improved productivity.

Learn how Connected’s Activating and Using Change Logs can help you track down and figure out where things happened.

Procedures not Documented

Your company could miss out on valuable tax deductions if transactions are not documented correctly. Ensuring compliance with regulations around tax reporting includes:

• Clear Policies. Make sure that expenses are not reimbursed without the correct supporting documentation.
• Save the Trees.  Go paperless. Using your accounting software solution to attach documents to transactions, can help keep vital information easy to find.
• Use Technology.  There are several different expense reporting technologies out there, which make it easy to report and attach documentation from mobile devices.
• No bill no pay.  Make sure that vendor payments are supported by the correct documentation before they are paid.

The Connected Accounting and ERP platform can help mitigate many of these common errors. Learn how Connected can help make your business more efficient and reduce many of these common errors.  At the end of the day , ensuring a healthy financial system, including a work/life balance,  benefits all involved.