TOP TEN BOOKKEEPING MISTAKES
1. Doing it yourself. No matter how much they hate it, many small business owners insist upon handling the books themselves. Having a competent bookkeeper is extremely beneficial in that they have the skills to do the job quickly and efficiently. They provide a second pair of eyes to find errors and to make suggestions.
2. Lack of communication. Having someone handling bookkeeping is only effective if they are kept up to date on all financial transactions. Frequent mistakes are paying someone a bonus and not reporting it, or buying supplies and not providing the bookkeeper with the information or receipts.
3. Not reconciling the books with the bank statement each month. One of the fundamental aspects of bookkeeping is reconciling the books and bank statements every month. Nonetheless, there are businesses that do not reconcile, or who do not do it properly. Again, this is a good reason for hiring an experienced bookkeeper.
4. Miscategorization or overcategorizations. There are fairly standard categories for expenses. However, often expenses are entered into the wrong categories or too many categories are created. Use general bookkeeping guidelines for standard categorization and create as few new categories as possible. Try to follow generally accepted accounting practices.
5. Forgetting to track reimbursable expenses. Small business owners often pay for expenses out of pocket or with their personal credit card. They first fail to track these expenses, then fail to submit the expenses to the company for reimbursement.
6. Not properly classifying employees. The proliferation of independent contractors, consultants, and freelancers, has made it difficult to determine who is on staff, and who is not. The results in misfiling when it comes to taxes. There are different rules and regulations for employees and non-employees.
7. No backup. The paperless office does not exist in the real world, where audits still exist. A paper trail, documentation or verification – in the form of backup documents – should be available. If all your files are on a computer system, you could be vulnerable to technical problems.
8. Not saving receipts of less than $75. While such receipts may not be required by the IRS, they provide documentation for the deductions you claim. It is very simple to have a folder for such receipts, which can prove valuable at tax time.
9. Petty cash nonchalance. A system should be set up whereby a set amount of money is in petty cash and each time money is taken out for any purpose, a petty cash slip is filled out. When the fund is exhausted, the slips will total the original amount and a check can be written to cash to set up the full amount again. Many offices are careless about petty cash, and don't keep accurate records.
10. Not deducting sales tax. A common mistake in retail businesses is not deducting the sales tax from the total sales. This results in a higher total sales amount and does not lower the amount of taxes due.
HOW DID YOUR BUSINESS RATE...
ON THE TOP TEN BOOKKEEPING MISTAKES?
If you would like to do better, much better, hire the professionals from Bend Accounting.
1. We will fit your bookkeeping system to your business. No two situations are the same! Cookie-cutter bookkeeping systems waste your time and resousrces.
2. We will help you understand what your bookkeeping reports are telling you about your business. That's a valuable guide to higher profits!
3. We will help maximize the time you can devote to growing your business, by reducing the hassle of bookkeeping. Replace your current confusion with efficient, easy-to-understand procedures.