Small business owners common bookkeeping mistakes in the inceptions of their business is not having an accountant to do their books properly. Having a professional help, or an accounting software can really help you to leverage your business to the next level. Bookkeeping mistakes can be avoided if we have a clean and manageable book.
The following are 10 of the most common bookkeeping mistakes made by small business owners.
1. The Pressures of tackling bookkeeping alone
Money management is the most important task in keeping your business above water but there is no law saying you have to do it alone. There are 24 hours in each day and it is significant that as a business owner you accomplish as much as you can, putting the important tasks first. Assigning your bookkeeping tasks to a professional will first help omit errors and secondly free up some time for you to focus solely on managing your business.
2. Being Frugal can cost you more money
Every business owner wants to save and loves a good discount, but being thrifty can also cost you a pretty penny. Always think quality before quantity and as business owners, we think quantity will give us a bang for our buck. Just to be on the safe side, make sure you research products before spending money. You should also purchase products with long life spans and warranties. The best time to purchase office supplies is when items are on sale or with coupons with percentages or money off.
3. Vendor Negotiations
In most cases, small businesses usually patronize one vendor for supplies on a monthly basis. Building a relationship with your vendor would be great, it’s good to know who you’re purchasing from when you frequent an establishment. When you build a rapport it is easier for you to negotiate prices and longer terms, this means less out of your pockets to generate more income.
4. Minor Purchases
Major Deal to Keep Receipts Saving receipts for minor purchases may not seem like a big deal, but always remember those small purchases add up to big money in the end. Even meticulous business owners forget to save business receipts, but good thing you don’t necessarily have to have receipts when claiming expenses to Uncle Sam.
5. How to Write off Major Purchases
As Immediate Expenses Visiting your local office supply store and picking up a pack of paper worth $250 can easily be written off as an expense. But, there is a difference in filing if you were to purchase a printer for the same price of $250. Due to the longevity of the printer, you would file that as an asset instead of an expense. Just because you spent the same amount of money does not mean you can file your purchases as the same deduction.
6. Charitable Tax Donations Donations
Are considered write-offs only if they are for your personal tax returns. Unfortunately, businesses are not offered the same deductions. If you’ve made this mistake in your books the IRS will make sure you don’t make this same mistake twice. Since businesses are given recognition and advertising space etc. these gestures are not considered charitable donations.
7. Failure of keeping up with Hard Copies of your Records.
Many business owners think that keeping their records on the internet is easier, efficient and eco-friendly. In many ways that is a very good idea, or is it? Most banks only keep your business records online or “in the cloud” for a couple of months. If you don’t request your statements regularly they can be erased. It is always good to have both as a business owner just to have a secure backup.
8. Reporting Accurate Sales and Payroll Taxes
This really sensitive matter is one that you should leave up to your accountant. IRS has a low tolerance for any mistakes made on sales and payroll taxes. If you do result to doing sales and payroll taxes yourself make sure you triple check your returns before sending them off to Uncle Sam, just to be on the safe side.
9. Giving Employees Free Roam with little Management
A lot of small business owners make the mistake of trusting and assigning the task of bookkeeping to a family member or close friend. While we think we have made the right decisions, later on down the line some business owners notice they have been ripped off and money has been mishandled. To avoid this problem delegate an experienced bookkeeping professional and make sure you have a system of checks and balances in place. Please DO NOT allow open access to business records without the check and balance system. It is also a good idea to review petty cash ledgers as well as canceled checks once a month to catch any issues in order to make sure minute damage is done.
10. Keeping Things Current
We all know the primary years of owning a business is exceedingly overwhelming. And not keeping up with your bookkeeping will only add to the stress. It is a good sign if you’re lagging behind due to business. But that’s a sign that you’ll need to hire a helping hand to alleviate some pressure. Pricey inaccuracies will catch your attention quickly and your business will operate more efficiently.