Bookkeeping — when done right — can provide significant benefits for your business. It could help you manage and control your business and enable you to make smart business decisions. Typical bookkeeping services include recording financial transactions, identifying cash-flow problems, and looking for ways to augment profit or alleviate spending.
Proper bookkeeping could help small businesses operate efficiently and thrive in the long run. Unfortunately, some bookkeepers do the accounting improperly. You may want to take a look at some of the following common bookkeeping mistakes that you should avoid — as these may affect the growth of your small business:
1. Inefficient record keeping
Improper record keeping could lead to a slew of problems. This could be the result of not keeping receipts or not recording them. When it comes to monitoring expenses and cash flow, it is crucial that receipts are kept (even for small purchases!) and logged.
Also, some tax offices will require receipts to keep your tax liability low. If you keep your receipts and have accurate records, you could save money on your income taxes. Likewise, accurate recording of your income and expenses could save you much money too, which is certainly healthy for your small business.
2. Delaying the bookkeeping
Some people have the habit of putting off their work — especially when it comes to auditing. This is one of the biggest mistakes that you can make in operating a small business. If the bookkeeping is always delayed, the workload will pile up. At the same time, finances are not monitored right away. Working on bookkeeping each day could help you identify the problems that may arise in your business and will allow you to track and meet your financial deadlines.
3. Errors in classifying finances
Incorrect classification of your funds could result in loss of investments. A qualified bookkeeper must know where to organize the finances — whether they are income, profits, debit, credit, or expenses. He or she must also know how to do accounting that could identify the gain or loss undertaken during that period.
4. Mixing personal and business accounts
You should definitely have separate personal and business bank accounts. If you do transactions with just one account, it could be a big issue. In the situation you are audited, you will need to present records of your business transactions, which could be a mess if they’re mixed in with personal transactions. Better for your business and personal financial health, it’s crucial that you separate your home or family spending from your business expenses to avoid any financial problems.
5. Failure to backup data
You need to back up your data. Sometimes there are issues in the digital world. If you fail to back up your data, you might lose essential documents — including all of your financial records. It could leave your business on hold for a period and may affect the profitability or success of the business in the future.
Bookkeeping is healthy for the growth of your small business. If you can’t do it on your own, be sure to bring a professional bookkeeper on board. Just consider these mistakes and do what you can to avoid them — that way you have a better chance of avoiding any potential losses in your business.