Common Bookkeeping Mistakes Small Business Owners Make
Bookkeeping is a significant part of any business enterprise. It is known for being a tedious task, mostly because business owners would rather spend their time in other areas of the business, but a necessary practice to keep your business successful.
Here are five of the most common bookkeeping mistakes small business owners make when approaching their company’s finances:
Mixing Business and Personal Bank Accounts. Not having separate bank accounts for personal and business activities is one of the most common mistakes among small business owners. If you are audited, you may need to provide complete records of business-related activities that are separate from your personal expenses. It would be difficult and time consuming to remember which purchases were business expenses and which were personal. This may lead you to miss out on tax deductions and as a result, pay more taxes than you should, or mistakenly enter personal items on your tax return, which could lead to penalties. It is also recommended to have separate debit and credit cards for business and personal use.
Neglecting to Reconcile. Reconciling your books with your bank statements is a fundamental aspect of determining your financial health and should be done on a monthly basis. By reconciling frequently, you should be able to identify any irregularities before they become a major problem, monitor your cash flow, control theft, and ensure your transactions are recorded correctly and accurately.
Failing to Track Reimbursable Expenses and Saving Receipts. Improper or poor receipt and record keeping is another common mistake among small business owners. You should get into the habit of tracking your expenses and saving you receipts as soon as you incur them. The longer you go without tracking, the more likely your expenses will become overlooked. Maintaining accurate records and with a proper filing system ensures that expenses and ultimately profits are calculated correctly and that you have evidence to support any claimed expenses in your tax return in the event of an audit.
Avoiding Accounting Software. Accounting software can sometimes be overwhelming for some small business owners that prefer to record all transactions using Microsoft Excel or on paper and keep them in binders. If you aren’t sure what software to use reach out to us at CPA By Choice, we can help you select the best software and train you on it. HERE is some information on Quickbooks you can review to understand some of the benefits of accounting software.
Not Hiring a Professional. Did you know that 60% of business owners aren’t confident in finance and accounting? Professional bookkeepers have the required skills to do the job quickly and efficiently, and they have the necessary proficiency to locate subtle errors that might otherwise be missed. Bookkeeping is time consuming and may take you a great deal longer than it’d take an expert.
We understand that accounting can take you away from your day-to-day activities in your business and we would love to help you have more time for the things that matter to you. We are available to answer your questions, feel free to call us or send us a message.