Discussed below is a list of the common mistakes that happen in accounting (including invoicing) and how the best cloud accounting software or applications can help to avoid those:
Those who have gone through the start-up stage know very well how much they had to struggle with invoicing and invoices initially. Consequently, they are well aware of the importance of invoicing.
There is no doubt that money happens to be the core feature of any business. No business, whether a start-up or well-established, wants to mess it up. Every business would have a manual or system to ensure that the right things are practiced. At the same time, it is equally important to know well what things need to be avoided at all costs.
You need to realize that invoicing is not an activity associated with excitement or stimulation. Instead, it is a task that can provide a regular flow of income. In business, things are more than merely sending out accounts to consumers. Discussed below is a list of the common mistakes that happen in accounting (including invoicing) and how the best cloud accounting software or applications can help to avoid those:
Entering the Incorrect Invoice Type:
Online accounting software does not classify all the invoices as a common one, unlike an accountant. For example, the program is intelligent enough to identify or separate an invoice as 'supplier invoice' or accounts payable from another that might be a 'sales invoice' or accounts receivable. The program ensures that the right type of invoice is chosen.
Moreover, if a quote has been provided to a client and approved, you just need to get back to the initial quote and then hit the option for creating the invoice. There would be no need to go for anything extra.
Inter Bank Account Transfer:
In case there are multiple bank accounts, and you want to transfer funds from one account to the other, it can be efficiently executed by creating just a single entry for the first bank account. The software will automatically generate a corresponding entry for the other bank account. In case you generate two entries for each of the accounts for that same transfer, it will lead to an unreconciled transfer, and it will be a concern. To make things easy, there is a provision in the software that will allow you to go between the different accounts and make an entry for matching the transfers.
This function can be executed through the reconciliation option. Most of the top accounting software for medium companies also have a separate screen or page for this feature. Once everything is done, the user simply needs to refresh the page.
One of the most common errors while maintaining an account is the entry of a purchase invoice or bill, mostly when a bank makes a payment. A new transaction is created at the time of the reconciliation process instead of allocating the invoice payment. As a result, a duplicate expense is generated, whereas the outstanding or the unpaid invoice remains recorded in the form of the outstanding liability.
To avoid such a situation, modern accounting software is equipped with a function that is usually referred to as 'Find and Match.' It allows the user to quickly run a search based on supplier or amount preceding the creation of a new transaction. The same applies in the case of a sales invoice and receipts. The solution, in all the cases, is the same.
Incorrect Entry of Payroll Data:
In case you are using a specific program for payroll, the transactions will have to be recorded through a manual journal. However, an online accounting software ensures that the payroll cost does not mix up with individual liabilities. The program clarifies that the business's total expenses comprise salaries paid to employees and the directors' remuneration. These are recorded independently in the form of debits.
On the other hand, aspects like tax and payroll are considered credits and marked as liabilities. Once this is done, the liabilities and expenses are matched to have a clear understanding of whether anything is being overpaid or underpaid or not.
Not Checking Out Bank Statements:
A common mistake is to assume that the statement balance figure is the same as the bank statement. Whereas the statement balance happens to be calculated, there is a high chance that it may be different from the actual bank statement. There can be several reasons for miscalculating the balance. It happens mostly if transactions are unreconciled or if the input of any transaction has been overlooked. Online accounting software allows comparing the bank balance frequently. It helps to identify any problem instantly.
Creation of multiple accounts and sub-accounts:
Online accounting software offers a great deal of flexibility, particularly in terms of creating reports. These can be customized based on details as required by a business. Therefore it is possible to incorporate any account that needs to be evaluated to understand the state of the organization. Going ahead, these can be combined into sub-heads.
It is beyond doubt that the days when accountants had to stoop over ledgers to handle heaps of invoices and making entries. As of date, selecting the most used ideal accounting software in India is capable of delivering almost everything just with the click of a mouse. It is now possible to analyze any aspect of business anytime for on-the-spot business decisions.