Common Bookkeeping Mistakes to Avoid
We all make mistakes, but when it comes to bookkeeping, even small errors can lead to big problems. I am not one to write long drug out posts because as a business owner the one thing you seem to never have is time. I am a firm believer that you have to make time as you wear the many hats in your businesses so, I’ll start you off nice and slow.
Here are five common mistakes and how you can avoid them:
Not Keeping Receipts: Always keep your receipts to substantiate your expenses. I don’t care if you have to use your phone to take photo or keep a folder of these. There is no excuse to not ensure you or your employees have SOME system in place to make this happen. Use an email that is dedicated for receipts or use Google Drive to share links to folders where they vcan upload them if your budget isn’t allowing room to purchase the latest software. Even some bookkeeping software you are already paying for might have this feature already.
Mixing Personal and Business Finances: Use separate accounts to avoid confusion.I cannot tell you how time and time again I get clients who keep co-mingling funds in accounts for their business. As soon as you know you are getting to the point where you are able to, please get a business bank account. It’s ok if you started this way to boot strap funds, but as soon as possible track your personal funds as owner injections(depending on your entity set up is for tax purposes) and track what you are personally putting in verses your actual sales from customer or client tranactions. Do not use personal accounts.
Failing to Reconcile Accounts: Regularly reconcile your accounts to catch discrepancies early. This one is a biggy. If you don’t categorize or track what the money coming in and out is really doing for or against your business you are in for a world of hurt over time and especially, during tax time. If you don’t get this right your statements and reporting will make it difficult to manage and track funds and how they reflect on important reports such as your Income Statement and Balance Sheet. You also might forget who owes you and who you owe.
Ignoring Small Transactions: Even the smallest expenses add up over time. The whole point here is to ensure that your business stays in the air and you understand when things like marketing and ad spend are no longer working for your business. If you have small outlays that are coming out of the business you might not be able to make good management decisions and end up draining money in places that don’t move the needle toward business success.
Delaying Bookkeeping Tasks: Schedule regular bookkeeping sessions to stay on top of your records. This is why you are here on this site, reading this post. A good bookkeeper prevents a lot of the above and can be your partner to help reach break even faster and make a profit. Knowing the right time is right now because you might be afraid of looking at the numbers or what numbers to look at. Do this before it gets more costly.
By steering clear of these pitfalls, you can keep your finances in check and your business running smoothly.
