Top 5 Accounting Challenges Small Businesses Face

If you are a small business owner, you wear a lot of hats: Human Resources, Customer Support, Marketing, Accounting… the list goes on. All of these hats can lead to some incredibly long hours – taking away precious time from running your business.

Accounting is often an area that creates quite the challenge – especially if you don’t have the level of expertise like a professional accountant does. Here are a few common accounting challenges that we regularly see from our clients.


Taxes are already difficult, but filing your small business taxes on top of your own personal ones can be a complete nightmare. Off the top of your head, do you know if you’re writing off every deduction possible? Our guess would be that you’re not. But you’re also probably not reading J.K Lasser’s book from cover to cover every year or reading tax briefings from the FED and the state of Pennsylvania.

Missing out on tax deductions or not properly calculating how much you owe can lead to over-payment, which harms your business’s profitability. On the flip side, taking deductions you do not qualify for or potentially underestimating what you need to pay can result in penalties and fines. For example, one business owner we know had to pay thousands of dollars in sales tax because the law changed for her industry a year after she started her business. If she had been working with an accountant sooner, this could have been completely avoided.

Ensuring that you are paying exactly what you need to pay is essential. Tax law is complex, and if we’re being honest, very boring for most people. However, it’s not that boring for our team. We generally like to read those tax books and articles. That’s why working with an accountant can not only save you money but can also eliminate the dread you usually feel from January 1st until April 15th.


Small businesses can be very vulnerable to fraud, oftentimes lacking the right risk assessment policies. Fraud can leach out large amounts of capital every year, sometimes going undetected. If you do not actively seek out fraudulent activity, you are much more likely to experience it. Our biggest tips are:

  • Always have more than one employee handle financials – with accounting and cash-handling separated.
  • Watch your bank accounts carefully and look for missing or out-of-order checks, unknown payment receipts, or payments to unrecognized accounts.
  • Audit, Audit, Audit. Randomly check accounting, bookkeeping, cash, refunds, and inventory.
  • Hire a well-respected and trusted accounting firm.


Payroll is essential for all small businesses that have employees. It needs to be processed correctly and on-time. However, doing payroll manually can be daunting and very time consuming. Mistakes can be costly and disastrous. Accounting software can keep you up-to-date with government regulations (we recommend Quickbooks), and working with a CPA firm in conjunction can help you find the best solutions in addition to training you on how to properly use your software. 

For many small business owners, this decreases stress and provides more time to focus on business or family or anything that’s not payroll.


You cannot keep your business afloat if you’re not getting paid. Ensuring that invoicing is sent out, that payments are collected, and that expenses are properly recorded can be difficult to track – especially if you are a small team or a single owner.

Cash flow problems are one of the biggest reasons that businesses fail. So how do you avoid this? It’s simple: work with an accountant. Not only can they customize solutions that are unique to your needs, but they also play a crucial role in detecting cash flow problems early. They are able to find solutions before the effects of negative cash flow can be felt.

Unforeseen Expenses

When you’re already busy managing a multitude of recurring business expenses, it’s easy to forget about the costs you can’t easily predict. Many small businesses operate with limited capital, so when you encounter an emergency, your business may not have enough money available to cover it.

Building emergency spending into your budget can help take some of the stress out of the situation. Small businesses may also consider having a contingency plan in place, such as access to a line of credit. Unforeseen expenses are inevitable, but the more adept you become at predicting and preparing for them, the more stable your business financials will be.

Working with Gift CPAs

Our clients often tell us that we are the best accounting firm in Central Pennsylvania, but we’ll let you be the judge for yourself. Give us a call or reach out by email if you want to learn more about customized solutions for your business.

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