For the small business owner, bookkeeping is often seen as one of the necessary evils that we all must face. There is essentially a limitless amount of accounting mistakes that small business owners make in their day to day lives.
After 15 years of experience, I have seen just about everything, when it comes to bookkeeping. And unfortunately, I’ve seen some mistakes made again and again.
Today we’ll help you with one of those roles you have to play on a daily basis. Let’s look at how to avoid these 6 common small business accounting mistakes so that you can make your business a success.
1. Mixing Business And Personal Finance - This is quite possibly one of the worst accounting mistakes you can make. Whether you’re paying for business items from your personal account or worst yet, paying for personal items out of your business funds. Doing so will only lead to confusion and make it difficult for you or your accountant to sort things come tax time. If you are audited, you may need to provide complete records of business-related activities that are separate from your personal expenses. Make sure that your bank statements are properly reconciled every month. This will help to minimize errors and identify potential issues.
2. Don’t Do It Yourself - Businesses fail due to poor financial management. People think bookkeeping is “so easy” – but they’re wrong. A lot of people don’t know all the tax deductions and don’t know how to categorize things correctly. If the entries are not done correctly, then obviously, the reports will be wrong.
3. Poor Communication - It is important to have strong communications between the bookkeeper and company employees. Keep your bookkeeper involved and integrated with what’s going on inside the business. This helps the bookkeeper to create financial statements which reflect the true operational needs of your business
4. Not Setting Up Payroll Correctly - It is vital that payroll and employees have been set up correctly. Make sure you include the employee’s DOB, TFN and ensure that their penalty rates are correct. Make sure also that your linked accounts are correct.
5. Throwing Away Receipts - This is also a very basic mistake. Because they’re such tiny slips of paper, you tend to lose them. You put them in one place, and they end up getting somewhere else. By throwing away we don’t mean literally throwing them away—it also includes losing them, which is a big possibility when you don’t keep accurate records.
However, there are lots of programs now that allow you to save your receipts. For example, there are a lot of apps available where you’ll see an option to add a receipt. This can be a picture or scanned copy of a receipt.
6. Not Having Backups - We live in a world of heavy dependence on technology where issues can suddenly arise. There is always a chance that something could happen to your data, and you need to be prepared. It is important for every business to back up their data to avoid potential losses.
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Cloud Bookkeeping, Inc.
3281 E. Guasti Road, Suite 700
Ontario California 91761
Tel: +1 (909) 952-3804
Email: info@cloudaccountingandtaxes.com
Website: www.cloudbookkeepinginc.com