Avoid These Common Bookkeeping Mistakes
You have the product or service. You have the marketing tools. Revenue and expenses are coming in. Unfortunately, you are in the dark whether you are making or loosing money, and worse yet, tax season is around the corner. Now your accountant can’t get a clear picture about your finances and you are starting to feel overwhelmed! You now realize that in your attempt to manage your bookkeeping you have made a few mistakes like these:
1. Failure to keep all receipts. Perhaps you didn’t give bookkeeping much thought and skipped over its relevancy until now. Maybe you failed to keep all receipts because they were too small or insignificant, or you simply lost them. Unfortunately, this is all too common and I see this frequently with new and small businesses where the owner has too many responsibilities and keeping paperwork organized is pretty low on their to-do list.
2. Not tracking income and expenses. Whatever your situation, you must know precisely all your revenue received and expenses incurred – that is if you are serious about making it in your business! I have seen too many times businesses go under because they failed to track sales and expenses properly. And, I can say that doing so is relatively easy, provided you do it regularly and consistently. Here is what I recommend to all my small business clients, especially start ups:
💡 Organize paperwork. All receipts, especially those made by cash or through loans as well as other important documents must be saved into some working, organizational system where this paperwork can be easily accessed. In addition, I recommend using a water-proof and fire-proof storage that can be locked to guard against unauthorized access. If you are going to have an audit, not being able to get to your documents easily or having damaged documents can be very frustrating for both auditor and you.
💡 Invest in a bookkeeping system that will accurately transfer your data into meaningful reports that your accountant can easily read and understand. The most popular bookkeeping program in the business world is QuickBooks and for good reason. It is flexible, functional, user-friendly, and inexpensive; all ideal qualities for small businesses. Just have someone give you a tutorial because even these simple programs require some understanding. Because typically it’s the self-taught QuickBooks users who often cause the biggest errors!
💡 Do your bookkeeping regularly so you can run reports and evaluate your company performance on a consistent basis. With this data you can implement changes and make improvements based on concrete data instead of entrepreneurial intuition. That’s smart management!
3. Failure to reconcile your bank account monthly. Although you may not have realized the relevancy of monthly bank reconciliation but this is, in my opinion, one of the most important business functions. There are numerous reasons why it’s so important but one of the biggest is that it will provide you with an accurate picture of how you are using your money, as well as ascertain your your real time available funds. It helps you account for all of your money and guards against over drafting your account. Whether you use a manual system or a software like QuickBooks, don’t let too much time go by in between reconciliations. Regularly balancing your bank account is key.
4. Not backing up your data consistently. You finally got all of the work done for the day then disaster strikes at night. You come in the next morning to find your company file corrupted or yesterday’s data completely erased, or the entire data file being completely inaccessible. Prevent data loss by backing up at the end of your workday and keep the back up safely locked in a fire-proof and waterproof location.
5. Not having someone else handle your bookkeeping. Since you might not know proper bookkeeping procedures nor do you have time to figure it out, you should have someone with more skill and training handle your bookkeeping needs. An experienced bookkeeping professional will complete your bookkeeping functions accurately and quickly so you can invest your time directly into revenue producing activities.
Need a better bookkeeping and accounting system to track your business? Call (212) 537-9060 office Monday through Friday to speak to our accountant. If you need QuickBooks setup or training please request to speak to a QuickBooks ProAdvisor.