Accounting errors can significantly affect the financial status of your company. When left not corrected, such errors can result in unbalanced books and undependable financial statements. Thus, you need to identify and rectify accounting errors promptly. A skilled accountant in Westchester County, NY can help you avoid these errors or correct them as they occur.
Kinds of Accounting Errors
It is important to understand the common kinds of accounting errors, so you can identify and correct them right away. Below are the different accounting errors that can happen:
- Original entry errors. This can occur if your staff enters an incorrect transaction amount. For instance, if an employee posted $10 instead of $100, such an error would impact all transaction accounts with the wrong amount.
- Duplication errors. This type of error can happen when an employee records a transaction more than once. This could mean overstated expenses and accounts that don’t reflect the real financial position.
- Omission errors. Your employee may not record a transaction. This could occur for different reasons like overlooking the invoice. Not recording a sale or purchase can result in discrepancies in accounts receivables and payables, which impact the overall financial statements.
- Entry reversal errors. Such errors happen when an employee fails to enter data in the right direction. An example is debiting an account; instead of crediting it.
Preventing Accounting Errors
Below are measures you can take to prevent accounting errors from occurring:
- Implement reconciliation practices. Comparing accounting records with your bank statements is necessary to make sure they match. With such a practice, you can detect and correct errors like entry mistakes or unrecorded transactions early on.
- Keep track of unexplained financial fluctuations. Pay attention to the profit and loss statements. Investigate sudden, unexplained changes right away to reveal possible recording and accounting mistakes or omissions.
- Be wise when using accounting software. To mitigate accounting errors, you must leverage dependable software meant to automate your accounting processes. This software lets you automate vital checks and balances. This can improve financial record accuracy, minimizing the risks of errors.
- Maintain documentation. Keeping a record of all financial documents like invoices and receipts can go a long way in mitigating accounting errors. This prevents omissions and offers a reference to verify recorded transactions.
- Outsource accounting functions. For a lot of small businesses, handling all accounting in-house can be exhausting. Accounting services come with many benefits. It makes sure that professionals are handling your financial records and lets your in-house team concentrate on core business operations.
