Top 7 Bookkeeping Mistakes Made by Small Businesses.
From start-ups to major corporations, bookkeeping is an important part of any business plan. It is the core of a company’s success, and failure which can cost the company considerably.
Below are of the most common blunders that you want to avoid:
- Keeping the books yourself. Most start-up owners usually handle their books themselves. Hire a capable bookkeeper to handle the books because they have the expertise to do the job quickly and professionally and also, provide a second opinion in case of errors and make suggestions.
- Not tracking reimbursable expenses. Small business owners usually pay for expenditures with their own personal money then forget to track these expenses. They then fail to collate the expenses to the company for reimbursement.
- Lack of communication. Getting someone to handle bookkeeping is only effective when they are carried along and kept current.
- No backup. The paperless office is a mirage in the real world, where audits now exist. Paper documentation for backup documents should be available, particularly if all files are on the computer system, which could be susceptible to to technical challenges.
- Not deducting sales tax. This is a common mistake in retail businesses especially, not subtracting the sales tax from the total sales. This results in a greater total sales amount and does not reduce the amount of taxes due.
- Not using Petty cash. A process should be designed whereby an amount of money is in petty cash and every time money is taken out for any reason, a petty cash slip is filled out. When the fund is exhausted, the slips must total the original amount and set to the full amount again.
- Miscategorization. Expenses have fairly standard categories. However, expenses are often entered into the incorrect categories or too many categories are created. Adopt general bookkeeping guidelines for standard categorization and try to create as few new categories as possible. Also, try to follow generally accepted accounting practices.