Are You Making The Same Common Mistakes?

 If you Google search ‘biggest business accounting mistakes,’ more than eight million entries are available to view.

This means there are many opinions about what are the biggest or most common accounting errors. Here is sampling from the first page of a Google search:

• "How to avoid the six worst accounting mistakes"
• "Eight common accounting mistakes you can avoid"
• "The Top 10 accounting mistakes"
• "Five common small business accounting mistakes"

And so on, and so on.

Among the mistakes cited on these pages are:

• lumping all deposits together;
• only forecasting to year-end;
• not protecting account information;
• budgeting at account code level;
• reporting on the wrong performance level;
• missing deductibles and tax breaks.

The reality is that a stunning number of accounting mistakes are made daily by businesses. These mistakes cost them money; artificially inflate a company’s performance; unintentionally mislead decisions makers; or that help a company grow or drive a stake in its heart.

Sometimes small accounting errors can lead to big results. On Aug. 9, Reuters reported that Germany has found an extra $78 billion misplaced due to an accounting error.

“Germany is 55.5 billion euros ($78.7 billion) richer than it thought due to an accountancy error at the bad bank of nationalized mortgage lender Hypo Real Estate (HRE), the finance ministry said…’Apparently it was due to sums incorrectly entered twice,’ said a ministry spokesman on Friday, adding the reason for the error still needed to be clarified.”

Oops.

People sometimes make mistakes. They overlook things, they get comfortable with their processes and procedures, or they don’t have the requisite knowledge and experience to know the right thing to do. Yes, there are a great many “common” accounting mistakes. Here are the biggest: not knowing what you don’t know and not making sure you’ve checked, multiple times, what your numbers are telling you.

Accounting is a big, complex, technical, and constantly changing discipline. Knowing what you don’t know and having people on your accounting team - internally, externally, or both - whose abilities will save or make you money is what you’re after. And even then you want to challenge them to justify their work, findings and conclusions.

Finding team members in which you can have confidence may seem daunting. From a distance, all accountants and accounting firms may look like the same kinds of people doing similar things. That’s not correct.

Several questions worth asking your accounting team members before you engage them are: 

1. What procedures are in place for quality control?
2. What is your continuing education policy for staff members?
3. Could I review your most recent Peer Review report?
4. Do your staff members have experience in my industry?

Additionally, you might compile a selection of common accounting mistakes and match them against the work done for you. Your greatest benefit will come from finding top-notch people, putting them to work, and then checking their work. You don’t want to find yourself saying “I could have avoided this if I’d just…” as you stare at a piece of paper detailing an accounting error. Happiness is never having to say “If I’d just…”