As a business owner, it’s natural to want to oversee every aspect of your business yourself. But even the savviest business owners make mistakes, especially when it comes to bookkeeping. There’s no question that maintaining accurate financials is a fundamental part of doing good business. Being aware of the most common bookkeeping mistakes can save you from sloppy financials, unnecessary stress, and potential penalties.
Here are the top bookkeeping mistakes made by small businesses:
- Trashing “petty cash” receipts
Small charges add up fast. Although receipts less than $75 worth of expenses might not be required by the IRS, it helps to keep these records for important things like budgeting, claiming tax deductions, and tracking overall cashflow. It’s also good to keep documentation in the case of an audit.
- Not keeping business and personal finances separate
Mixing personal and business finances can get a bit messy. Making sure you have different accounts for personal purchases and business expenses keeps things clean and segmented properly. Keeping finances separate can also illuminates true operating costs, so you aren’t kept in the dark about how your business is performing. On top of all that, it makes things significantly easier for when tax time rolls around since you’ll have a clear view of which expenses are deductible.
- Not backing up files
Keeping records and backing up files is of utmost importance. Although cloud storage is convenient and secure, be sure to ask your bookkeeper to regularly pull hard records of bank statements, business reports, and other critical documents. This way, you’ll stay on top of audits and have all your information in the case of any compromised technology or online accounts.
- Not classifying employees properly
Do you have full-time staff, part-time staff, a team of contract workers, or a combination of all of these? Work with a bookkeeper to understand what the differences between a 1099 and W-2 employee are so your business remains compliant and you can avoid misfiling taxes.
- Taking it on yourself
Very few small business owners are self-professed financial experts. In the same vein, thinking that software and technology can compensate for a lack of bookkeeping expertise is a common blunder. Getting started with software and realizing the immense learning curve can set you even further back with managing your own books. Leaving it to an experienced bookkeeper who’s trained in your particular industry can allow you to gain much more clarity on business performance. Be sure to ask the right questions when finding the right bookkeeper for your business as well.
Ready to get your small business finances in tip-top shape and dodge these mistakes altogether? Call us at 844-629-8797 or click below to request your free consultation.