Get All Access for $5/mo

Tax Trouble? Avoid These 9 Common -- and Costly -- Mistakes. Sound tax and accounting procedures are essential to growing a financially secure company. But multiple hiccups threaten the accuracy of these processes, elevating the risk of compliance penalties and reputational harm.

By Anand Daga Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.

Sound tax and accounting procedures are essential to growing a financially secure company. Unlike individual taxpayers, who habitually wait until April to get their information in order, businesses have to maintain accurate records and workflow year-round. But multiple hiccups --from simple human error to rampant technology adoption -- threaten the accuracy of these processes, elevating the risk of compliance penalties and harm to your reputation.

The impact of such mistakes can be huge. In 2014, the IRS collected more than $7 billion in civil penalties from U.S. businesses due to misreported income and employment figures.

Bloomberg BNA recently surveyed 200 in-house tax and accounting professionals to explore the blunders their departments frequently face. A look at the top nine mistakes reveals a diverse set of IT, regulatory and organizational struggles that both seasoned and first-time business leaders should strive to overcome.

Unsurprisingly, the most common misstep for tax and accounting professionals is the occasional botched data entry. More than a quarter of survey respondents have seen false numbers plugged in to their enterprise systems, a seemingly minor problem that can result in egregious mix-ups on tax filings, financial statements and business planning.

Related: The Basic Tax Deductions Most Small Businesses Forget

1. Failing to attract or retain top tax staff

In any department, success typically correlates with the quality of the people in them. Unfortunately, nearly one in five tax and accounting professionals report that their team struggles to find and keep talented employees. Given the deep subject matter expertise and quantitative chops required to fill these positions, companies that contend with high turnover or under-trained staff expose themselves to increased oversight and accounting misjudgments.

2. Saving files with financial information to personal devices

BYOD policies and employees who work from anywhere on their personal mobile devices might be a boon for productivity, but they're a menace to data security. For companies today, it's not even a matter of if a data breach will occur -- it's when. Enacting stricter file-sharing policies or investing in more secure collaboration systems is critical to protecting sensitive tax and accounting documents.

3. Deleting custom Excel formulas

Using Excel spreadsheets for important tax and accounting calculations is problematic enough. When colleagues regularly share and resave the same worksheets, the chance of accidentally erasing intricate formulas spikes. If whoever created the original formula is no longer with the company -- or kept no record of it -- tax and accounting departments can burn hours trying to reconcile vital information.

4. Overriding tax system data with external figures

Even companies that wisely invest in enterprise tax and accounting programs grapple with employees' working outside these systems. Relying on figures estimated outside of a central system leaves no paper trail for internal or external auditors to review and distorts any analysis performed for future tax years.

Related: 8 Things You Must Do to Protect Your Assets

5. Working on unsecured Wi-Fi networks

Employees and executives at growing businesses aren't usually office dwellers. Cranking through to-do lists from coffee shops, coworking spaces or airport terminals may be efficient, but connecting to their public Wi-Fi networks exposes confidential tax and accounting information to malicious intruders. Stronger remote access policies and staff cybersecurity education, along with virtual private network (VPN) access, can help staff work flexibly and safely.

6. Prematurely closing the books

More than one in 10 tax and accounting professionals have seen their team close out a tax year's financial books before all of the necessary information was collected. Process mistakes like these can go unnoticed for months or years, skewing future book numbers and triggering surprising fines.

7. Lacking C-suite awareness

Executives in small and medium enterprises wear multiple hats, overseeing strategic growth, product development, and even sales and marketing. Tax and accounting may be seen as a less strategic corporate function, and C-suites that don't understand its impact (then fail to invest in high quality tax tools and personnel) put their entire operation at risk.

8. Not tracking city-level regulations

Between the Federal tax code, GAAP accounting standards and state laws, tax and accounting teams have no shortage of rules to follow. Businesses that already lack tax and accounting resources are prone to missing city-specific regulations, a blind spot that can inhibit a company's geographic expansion and tarnish its local image.

9. Avoiding tax tool investments

One glaring problem underlies many of the aforementioned mistakes: companies' insufficient investment in the right tax and accounting systems. Businesses that settle for free or half-baked tools won't have full visibility into their assets or cash flow, making it difficult for investors to conduct pre-funding due diligence. Similarly, inadequate tax tools usually don't have the functionality or financial controls necessary for companies planning to go public.

Related: First-Time Business Owners: A Brief Guide to Tax Filings

Anand Daga

Senior Product Manager for Bloomberg BNA

Anand Daga is the senior product manager for Bloomberg BNA. 

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Side Hustle

Top Secrets to Starting a 6-Figure Etsy Side Hustle That Earns Passive Income, According to 3 People Who Did It

Etsy remains a popular ecommerce platfrom for sellers — and can be incredibly lucrative for those who know how to use it.

Science & Technology

The 7-Step ChatGPT Formula for Peak Productivity and Profit

With this powerful solution, you can take your productivity and profitability to new heights with ease.

Business News

SoftBank CEO Says AI 10x Smarter Than Humans Could Be Here in a Matter of Years

SoftBank CEO Masayoshi Son spoke to shareholders during the company's general meeting on Friday.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Business News

Amazon Is Thinking About Charging Extra for AI Alexa

"Hey Alexa, how much are you going to cost?"

Thought Leaders

10 Simple, Productive Activities You Can Do When You Aren't Motivated to Work

Quick note: This article is birthed out of the urge to do something productive when I am not in a working mood. It can also inspire you on simple yet productive things to do when you're not motivated to work.