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If You’re Making Any of These Mistakes in Bookkeeping – You’re Losing Money
Lack of experience coupled with proper knowledge of how accounting functions are performed, small business owners commonly commit errors in their early years. Maybe they fail to dedicate resources on learning to become an expert accountant. But by taking some smart steps, small business owners can avoid bookkeeping mistakes that negatively impact the company’s finances.
Common bookkeeping mistakes made by small business owners:
Taking Lion’s Share of the Work
It’s definitely important that you manage your money properly. It isn’t advisable, however, that you do it all by yourself, especially if you don’t have an in-depth grasp of accounting functions and business tax law. Delegate bookkeeping away to an expert in accounting, like a reliable company offering outsourced bookkeeping services. This will free you up to work on your business and you’ll see fewer errors and your money losses will go down.
Cheap Isn’t Always The Best
Business experts may suggest you spend frugally; however, too much thriftiness isn’t always good. Spending money on getting the services of the bookkeeping expert is a wise idea. Being careful with proper research and planning involved in spending will take you a long way.
For instance, getting office decor will surely make work environment feel comfortable to work in, but don’t go all in. Gauge your options, wait for a sale on a high price item with decent quality and then make a move. You’ll be better off in the long run than if you bought cheap furniture.
Inefficiency in Keeping Records of Small Transactions
Little drops of water make the mighty ocean. Similarly, each small transaction eventually adds up to huge costs, and every receipt lost of said small transaction ends up landing you into trouble when you have to show proof of the expenses you claim.
Skipping Bank Reconciliation
Many small business owners are unaware of bank reconciliation. Let’s understand first what it is! Bank reconciliation is the process of comparing internal accounting books of your business with the received bank statements.
This is often done monthly but can be done regularly. It is a vital process as it ensures that there’s no discrepancy between the two accounting records. However, there can be numerous reasons behind discrepancies in your books including unclear checks, pending transfers, unknown credit card deduction, errors, bounced checks, frauds, etc.
So, if you fail to perform bank reconciliations regularly, you are inviting those issues, which will grow over time. Thanks to software services such as QuickBooks, NetSuite, Xero and Sage that are making more accessible for businesses to remain on top of reconciliation always.
Not Taking Advantage of Possible Vendor Relationships
There is always a vendor that each business owner frequents for supplies. It would be a smart move to get into good terms with said vendor. You can squeeze in more cash flow for yourself if you can work up a deal and get discounts or longer terms of payment.
Not Logging Major Purchases as Assets
Spending $400 on buying A4 paper, pens, printer ink, and other items can be written off as ‘office supplies’. However, spending the same $400 on something like a Xerox machine should be logged as an asset as it can be used for a long time. Depreciate it over its predicted lifespan.
Not Keeping Physical Copies of Records
In the modern world where everything is handled electronically, we have wonderful features such as cloud storage and internet banking. There are pretty safe, and eliminating ‘paper’ from your business is a nice eco-friendly idea, but you best be careful. Many banks don’t allow you to access your records online for longer than a few months, so you might not have all your records in physical form if you wait till it’s tax season to print the records.
Failing to protect your data adequately
In today’s technological world, every business is relying greatly upon technology to ease their process. But trusting software blindly may lead to errors that will bring unfortunate time in your business. So don’t forget to maintain a backup of your financial data securely. You can embrace cloud-based solutions to safely backup your bookkeeping transactions and other files as well.
Inaccuracy in Reporting Payroll and Sales Tax
The IRS will not be happy if you mess up in this department. If they find any discrepancy in the amount of tax owed by your company, you’ll be fined heavily. Delegate this task to a reliable tax preparation company that’ll make fewer errors, or else you best be checking your returns twice or thrice before handing them in.
Delegating Bookkeeping Blindly
Delegating bookkeeping away to an outsourcing service provider is definitely a wise choice. What isn’t a wise choice, however, is to do so without a proper system of checks and balances. There have been plenty of cases where small business had delegated the responsibility of company books to someone they trusted, only to find out years later that they were getting ripped off. If only they had checked in place to keep an eye on said person, they would have avoided much of the losses.
If you’ve read this article, you’re now aware of the mistakes that many small business owners make. This is the first step in ensuring none of this happens to you. If you strategize well, you’ll be in the safe and you won’t have to incur losses. Good luck in your business endeavors!
Are you looking for someone to clean up your books? Contact Cogneesol today itself! We are an ISO 9001:2008 certified company offering reliable and affordable bookkeeping outsourcing services to businesses worldwide. Call at +1 646-688-2821 to know more about our offerings.
Recommended Read: How to Schedule Your Bookkeeping Tasks for Best Results?
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