If you have done some accounting before you have probably heard of double counting. It means counting the value of the same product or expenses more than once. You must use the accurate amounts for every expenditure. Every single invoice has to be dated correctly. Double counting is the issue that happened while computing income. When double accounting has arisen while computing income, the income estimations will lead to confusion. It has mostly occurred while computing the final product as well as the intermediate product. Intermediate goods are parts of the final product. There is at all times the likelihood of including a good or service more than one time where merely final goods are to be computed while computing income estimations. This leads to the issue of double-counting and that becomes the reason for the overestimation of income. It might occur when you have put matching entries for inventory items, documented double wages for the same worker, or paid 2 invoices to the same dealer. These mistakes can lead you to report mistaken financial statements. You might also lose cash if you cannot recover duplicate payments from a customer.
What is double counting?
It is a mistake made when somebody records info two times in a ledger. It might affect a lot of departments of a business– basically any group with the responsibility to handle large amounts of delicate info.
Issues caused by double-counting can consequence in a corporation losing some of its value. In a lot of circumstances, it might give a firm added value however with probable penalties, if done incorrectly.
Some of the instances of double counting are as follows.
Recording inventory amounts two times
Double counting can take place when inventory amounts are inserted two times during assessment or financial reporting. Doing so might raise the value of a firm not deliberately. The firm might report a bigger inventory on the balance sheet as well as increase the number of current assets it possesses.
In such circumstances, the firm might have exaggeratedly high current assets in its financial statements. The firm will most likely report little turnover as it incorrectly reports additional inventories than it has.
Reporting sales two times
Firms might similarly find double-counting sales. This might occur consciously or by mistake. Sales might be documented two times on the balance sheet to raise a firm’s net profit. An audit will normally find out a sales record that has been double-counted.
Paying invoices and workers two times
Double counting can likewise occur when worker wages or invoices are paid two times. A payroll form for a worker might have been managed by 2 different HR personnel. Or a second, matching invoice was sent out by an accountant dealing with high volumes of invoices as well as POs. It is a good idea to use a paystub generator to create pay stubs for employees.
This might generate a complicated situation both in the firm and outside of it. Inside, the firm will have to settle the accidental payments with the workers or vendors. Outside, the financial reports covering the incorrect double payments will make the firm look less valued than it is.
If the firm cannot recover the additional payments, then it loses the value of the operation. Workers who report their revenue on a Form 1099 are called independent contractors. You simply pay 1099 independent contractor what you decided to pay him.
What consequence can double-counting have on your finances?
Double counting, whether done by mistake or incorrectly, might lead to loss of a lot of money and issues with audit reports. A lot of serious cases of double counting might even affect the repute of a business.
It most probably takes place when bookkeepers are working through a hard ledger or dealing with loads of invoices for a similar product or service. This can be additionally compounded if a lot of the sales records have a similar sum of money. Double counting mistakes that are not caught can become the reason for a firm to lose lots of money.
Double-counted sales records, as well as inventory entries, might likewise lead to claims of deception. If a firm is found to be reporting profits when in fact it is increasing losses, it might be inspected for influencing financial statements.
How to avoid double counting?
It can be avoided if companies regulate their bookkeeping practices. A lot of double-counting mistakes happen as a consequence of a human mistake. With the correct documentation as well as accounting procedures, these mistakes can be restricted to a minimum.
– Train staff to be careful when entering info
The accounting workforce and other personnel must be trained to double-check each sales record as well as stock data they make. This will assist them to see if another workforce has previously done the work they are about to do, as well as avoid duplicating their work.
Steady reminders from middle executives to enter invoice amounts as well as part numbers appropriately must also be the standard, both in written form and verbally. Executives must point out double-counting mistakes so workers understand what kinds of info are most disposed to double counting.
– Clean up your customer contact info
Occasionally double-counting errors occur when a vendor uses numerous addresses or contact info. This might lead to circumstances where you unintentionally send two to three copies of a similar invoice to a similar vendor.
It is good to review your seller contact info every so often to get rid of the info you do not need. It might likewise be good practice to call the vendor’s contact individual to check that the info you have on file is accurate.
– Install a PC- or web-based accounts payable system to manage your sales records
A great way to avert double-counted sales records, as well as invoice info, is to install an ERP system that keeps a record of all of your sales data. This system permits you to make one master file record for every vendor or customer with a precise code allotted to it. Every record can cover bank details, contact info, as well as a record of all dealings that can be accessed by anybody on the finance team.