Bookkeeping is important for every business big or small. Know the bookkeeping mistakes that you need to avoid for a successful business.
Bookkeeping Mistakes That Has To Be Avoided: Bookkeeping is as important for a business as it is to create unique ideas and market them. You gain profit with sales and marketing. But how to keep a record of the profits? Bookkeeping enters the picture here. Making mistakes in bookkeeping could keep you from knowing the real financial condition of your company. So, as tough and tedious bookkeeping sounds as a job, it is, indeed, the most important one.
It plays a significant role in the success of your business. Imagine not knowing the profitability of your business. How would you make goals for your business?
Coming to the points that would help you improve your bookkeeping habits. Here are the some points that will help you know what mistakes to avoid and get efficient in bookkeeping:
1. Poor Bookkeeping (Entering Inaccurate Records)
Never make the mistake of doing irregular bookkeeping. Result of improper bookkeeping could lead to wastage of a lot of time and money. Correct auditing could save you a lot of bucks.
Additionally, it is also pivotal for IRS audits that you keep a clean and clear accounting and bookkeeping record on a monthly basis.
2. Improper Categorisation of All Expenses
It is pivotal to have formal knowledge and experience of bookkeeping. If you have hired someone who is not familiar with the proper procedures of bookkeeping, it could cause some serious problems.
Only if correct income and expenses tracking is done and they are categorised properly will the bookkeeping happen perfectly. And the correct profitability of the business can only be known if bookkeeping is done accurately.
3. Not Properly Reconciling Bank Accounts
This point should always be kept in mind— having separate bank accounts. Don’t make the mistake of having one single account for your business as well as personal use.
Many people have sole proprietorship firms where they think it is normal to keep one bank account because the money they earn is their own profit.
But having one account could create a mess while auditing. It would become difficult to identify the expenses and earnings of a business. Make sure to reconcile your business account statements on a monthly basis.
4. Poor Communication within the Firm
Your employees and bookkeepers must be well-mixed. The lack of communication could create errors in the financial statements that are produced monthly or annually.
Bookkeeping team or individual must have knowledge of the inside as well as the outside expenses and financial transactions. Minor financial transactions can also make a change in the whole auditing process.
Therefore, it is mandatory to keep a good level of communication in between employees and bookkeepers in your organisation.
5. Not Having Any Backups
Technology is a boon and a bane for everyone in today’s time. If you are keeping all your keeping records online, or any digital form— make sure to have backups of it.
Having data backups can save you from any technical error or glitch. And in case, there is some incident of data loss— your backups will save you from all the trouble.
6. Classification of Employees
A company has many employees. All of them have different contract periods, salary slabs, and employment periods. You have to divide them into proper classifications so as to avoid any misfiling.
Having many employees increases the chances of misfiling tax returns and over payment of tax charges. Classification of employees can help you avoid this mistake.
7. Improper Cash Management
For all the new businesses and small firm owners, it is quite common to operate with a small amount of cash. And then these small amounts aren’t tracked.
Forgetting to keep track of cash flow is one of the major bookkeeping mistakes. To avoid such poor cash management, try and keep a petty cash lockbox.
Once all the petty cash management is done properly, and receipts are tracked— all reimbursements are easy to record and manage.
8. Lack of Time Management
Many company owners don’t feel the need to have professionals for their bookkeeping work. This creates bookkeeping problems. When many errors arise in bookkeeping.
This in turn leads to more time to correct the mistakes and complete the auditing process.That is why it is of prime importance to keep a team of experienced bookkeepers. And if the company is new, it is better for them to get expert guidance from some outsource before establishing a proper bookkeeping team.
9. Avoiding Sales Tax
Oversight of sales tax is such a common mistake done by the majority of business owners that own small businesses. This ignorance could cost you through penalties and fines.
So, instead of neglecting this as a minor mistake, make sure to always pay attention to all the sales tax records.
10. Neglecting Reimbursable Expenses Tracking
Oftentimes, small business owners have the habit of using their own money to pay for the expenses of the company. In such a scenario, there are high chances of forgetting to note these expenses and reimburse within time.
Since no records of such reimbursable expenses are kept, the firm loses money through tax deduction. Hence, it is always advisable to not overlook these expenses and keep track of each one of them.
11. Recording Digitally Transferred Money as Income
All day long we all including business owners make and receive payments via different modes. They can receive payments digitally through PayPal, GooglePay, etc. Interestingly, your accounting software records that information as your income.
Consequently, the business account balance increases incorrectly. To refrain from any such misunderstandings, log in and update the account details every time the payment is recorded as income.
You have read all the mistakes and are now more informed than before! What’s next? Keep your bookkeeping job up to date. Get experts to handle the work. This way you will be able to avoid all the bookkeeping mistakes and help your business in multiplying its success rate!
Conclusion
Find bookkeeping triesome and monotonous? Leave the job in the experts’ hands and see the results for yourself! Vakilsearch is here to help you with all your bookkeeping woes. Get the bookkeeping experts to help you with the accounting & bookkeeping process in the best way possible.
Read More:
