Prevent Bad Bookkeeping from Hurting Your Small Business
A lot of small companies have a staff or family member without any type of accounting or bookkeeping experience do their books, which seems cost-effective, but can be a bad decision in the long run. The money you are “saving” could actually be costing you.
What Can Go Wrong
It doesn’t take much for a bookkeeping error to wreak havoc on your business. It can prevent you from getting paid for completed work, strain or ruin valuable vendor relationship, cause you to be audited, or worse. Here are some common errors that can have lasting consequences:
- Not saving receipts. Even the most meticulous business owner occasionally forgets to save a business-purchase receipt. It might not seem like a big deal if a restaurant receipt is missing here or there, but those small purchases can add up to big money. Plus, you don’t want to have to answer to Uncle Sam if you claim expenses without proof.
- Not understanding the value of logging short-term supplies and long-term assets differently.
- Making mistakes when writing off charitable donations, for example, claiming deductions for donations that were offset by concessions like advertising space.
- Failing to back up data. Make sure your bookkeeper uses software with a failsafe backup system, even if your data is in the cloud. It makes sense to keep one copy of everything in the cloud and another securely on your desktop or hard drive.
- Not accurately reporting sales and payroll taxes. If you distort your sales or payroll taxes, you can expect hefty fines.
- Not having checks and balances. Always review cancelled checks and petty cash ledgers once a month.
- Not staying up to date. Failing to keep your books current can lead to not knowing where you stand financially. A professional will provide accurate, timely reports so you know how things are going.
- Mixing business and personal accounts.
- Managing billing inefficiently.
If you don’t have a fairly strong background in accounting and business tax law, it’s probably not a good idea to handle your own bookkeeping.
Hiring a professional bookkeeping service will minimize the chance for errors in categories like tracking expense, paying vendors, balancing bank accounts and staying ahead of payroll.
Delegating this non-revenue-generating task to a professional will set your mind at ease and free you up to work on your business.