Bookkeeping is a necessary task for any business, big or small. However, even the most seasoned professionals are not immune to making mistakes. But if you’re a small business owner attempting to handle their own bookkeeping, you should know a few things. Avoiding these simple bookkeeping mistakes can save you time, money, and frustration.
In this article, we’ll explore some of the most common mistakes small business owners make when handling their finances and provide tips and tricks.
Can I Avoid Simple Bookkeeping Mistakes (As A Non-Professional?)
Absolutely! You can prevent common bookkeeping mistakes and keep your finances in order in several ways. While these bookkeeping mistakes are prevalent, you don’t need extensive years of accounting experience to learn how to keep costly problems from happening.
Hiring a professional bookkeeper can avoid many common bookkeeping errors. Still, if you’re trying to manage your business’s financial records yourself, you should learn what not to do in any case.
Let’s take a look at the top 5 biggest bookkeeping mistakes…
1: Going Totally Paperless
Embracing new technology and going paperless may seem like the ultimate solution for modern offices. However, keeping a paper trail is still essential, especially in bookkeeping. The biggest bookkeeping mistake one could make is not having paper backups. Not only is it important for maintaining a record of financial transactions, but it is also crucial for avoiding any legal issues, including audits.
The importance of having paper backups becomes amplified when issues arise with technology. A paperless office can quickly become a major liability, leaving companies vulnerable to data loss, unauthorized access, and other technical problems. This is particularly problematic regarding audits, where taxing authorities like the IRS require companies to have a well-organized paper trail with clearly visible documentation.
Solution: paperless accounting software
Fortunately, there is technology that can be leveraged to make daily operations easier, with apps that allow businesses to save digital receipts and documents. Such accounting software programs are an excellent way to reduce paper usage and save space, but they should only be relied on partially.
Keeping a paper backup of finances for at least seven years is essential to avoid penalties during the event of an audit.
2: Failing To Reconcile
One of the most significant benefits of reconciling your books is that it allows you to understand your financial position better. This is particularly important for small businesses with limited cash flow and resources.
Accurately tracking and assessing your finances will help you determine how much money you have available to invest in new ventures or cover unexpected business expenses.
Solution: be diligent about reconciling
Another critical benefit of proper reconciliation is that it can help you avoid costly bank errors. Without proper reconciliation, a simple mistake by the bank could go unnoticed, leading to financial loss. Reconciling your books ensures that all transactions are accurately recorded and helps you identify any inconsistencies in your earnings.
Although reconciling your books can be a challenging and time-consuming task, hiring an experienced bookkeeper can make the process much easier. A trained professional can navigate complex transactions and interpret bank statements. By delegating this responsibility, you can focus on running your business and leave the bookkeeping to the experts.
3: Neglecting to track reimbursable expenses
Do you want to avoid missing out on tax deductions and losing money by not keeping track of your reimbursable expenses? It’s time to start tracking, then! With the abundance of expense-tracking apps and programs available, there’s no excuse not to take advantage of these helpful resources.
By neglecting to track even your personal expenses, you’re essentially throwing money away. Every dollar you spend on business-related expenses is potentially tax-deductible, and you need to track these business purchases to make sure you’re taking advantage of valuable savings.
Solution: record everything
Getting into the habit of tracking your expenses as you accrue them is key. The longer you wait to track your expenses, the more likely you will overlook them. And with the fast-paced nature of modern business, it’s easy to get swept up in the day-to-day tasks and forget about the expenses you’ve incurred.
By tracking your expenses as you go, you’ll ensure that nothing slips through the cracks.
4: Lack of Communication
Hiring a part-time bookkeeper or outsourcing your bookkeeping work to a professional can be an excellent investment for your business, and help you avoid costly mistakes. Not only will it save you time and reduce the risk of errors, but it can also provide valuable insights into your business’s financial health.
But remember, communication is key! It’s important to ensure your bookkeeper knows about all financial transactions within your business, even the small purchases. Whether it’s a bonus paid to an employee or purchasing supplies for your business, you must keep your bookkeeper in the loop.
Otherwise, simple mistakes like forgetting to let your bookkeeper know important financial information can lead to costly errors.
Solution: transparency
By providing detailed information and receipts, you can ensure that your bookkeeper has accurate data to work with. This will help minimize accounting errors and ensure your books are up-to-date with accurate records.
Plus, accurate financial statements can also help you identify areas where you may be overspending or make changes to improve your bottom line.
5: Petty Cash Mishandling
Small businesses that use petty cash face the challenge of managing funds and ensuring every purchase is accounted for. This is where having a dedicated custodian comes into play. With a custodian in place, small businesses can rest assured that their petty cash is being managed effectively and that purchases are only made if the custodian approves them.
Having a dedicated custodian for the petty cash fund also helps limit the potential for fraud, theft, and abuse. This is because the custodian is responsible for monitoring every transaction to ensure everything is accounted for.
Additionally, with clear policies regarding petty cash purchases, businesses can maintain accountability and transparency.
Solution: dedicated management
Another important aspect of managing petty cash is documentation. Every purchase made using petty cash should have an accompanying receipt. This serves as proof of the expense and is essential for maintaining clear documentation for deductions during tax time. By keeping everything in order, businesses can avoid any unnecessary headaches down the line.
Finally, ensuring that the receipts and remaining small amount of cash in the fund equal the original dollar amount designated to the fund is important. This ensures that the petty cash fund is balanced and that no discrepancies could lead to problems later on.
Avoiding Bookkeeping Mistakes With A Professional Bookkeeping Service
Most small business owners try to handle their company’s finances independently, but don’t always know the nuances of accounting (or red flags) to prevent making mistakes with significant consequences.
Sunrise Virtual Assistant Services offers top-notch bookkeeping services specifically designed for small business owners like you. Our team of experienced professionals is dedicated to supporting your business’s financial success, no matter how big or small your company may be.
When it comes to bookkeeping, we understand that you have more important things to do than spend hours tracking your finances. That’s why we offer a wide range of bookkeeping services to help you stay on top of your business’s finances. Our team can handle everything from managing your accounts receivable and payable to reconciling your bank statements and preparing necessary documentation for financial reports.
At Sunrise Virtual Assistant Services, we pride ourselves on providing unparalleled customer service. Our team is always available to answer any questions and provide you with the support you need to support the financial health of your business. Your success is our success, and we are passionate about helping you achieve your goals.
So why choose Sunrise Virtual Assistant Services for your bookkeeping needs? We offer flexible pricing plans to fit your budget, personalized attention to detail, and a commitment to unmatched excellence in the industry.
Don’t let bookkeeping tasks become a headache. Let Sunrise Virtual Assistant Services take the reins and help you get back to doing what you love – running your business! Contact us today to learn more about our bookkeeping services and how we can help you succeed.
