If you’re like most small business owners, you likely think that you can do your bookkeeping yourself without any knowledge. After all, there is software that will “do it for you,” and how hard can it be? But the truth is, this thought costs small business a lot of money each year and can even cost them their business.
Here are eight bookkeeping mistakes that you'll definitely want to avoid.
1. Not Doing It At All – Many small business owners ignore bookkeeping entirely and try to get it all done the night before their taxes are due. This is a huge mistake for obvious reasons. Even if your business doesn’t make much money yet, you could be missing out on some awesome benefits if you don’t make this seriously. The fact is, you have to account for and record every penny you earn from all activities, all the time.
2. Not Saving Receipts – Every receipt should be saved, including those under 75 dollars. It’s easy; just put them in a box after you note them in your bookkeeping software. That way, if there is ever a question, the IRS will have the records.
3. Not Hiring an Expert – Even if you don’t hire an expert permanently, at least hire someone to help you set everything up so that you know you’re doing it right. Some CPA firms will send someone to your location (even at home) to help set up the books so that you do it right, and they can easily do the monthly, quarterly, and yearly activities.
4. Not Tracking Reimbursables – In some cases you may either offer employees or contractors reimbursements for some activities, or your clients reimburse you for some things. Many small business owners eat these expenses when they don’t have to.
5. Setting Up the Chart of Accounts Incorrectly – The chart of accounts is very important to accurate bookkeeping. Setting this up right will get you off to a good start and help you avoid money wasters and time wasters.
6. Not Reconciling Monthly – Each month you are supposed to reconcile your bank accounts and your bookkeeping accounts. This is an important habit to master because it will help you avoid mistakes. You don’t want to have to fix mistakes on New Year’s Eve while everyone else is partying.
7. Taking Money out of the Till – Even if you don’t have a real cash drawer, taking out money from your business account and spending it on personal items whenever you want is a bad way to do business.
8. Lack of Automation – Today, you can automate so much, including expenditures that go on a particular card and are booked automatically into your accounting program. There is more, but you’ll have to choose the software to find out what type of automation is available.
If you correct these mistakes you’ll have more of a chance to improve your business standing, make more money, and keep everything organized so that you don’t get overwhelmed.