Bookkeeping is often one of the most dreaded task for small business owners. They know they need to do it, but it often can take a lot of time and effort to get it done. Most small business owners are either afraid to outsource their bookkeeping or are afraid that they cannot afford it. Over half of small businesses do not keep their finances up-to-date on a monthly basis. They usually till tax time to reconcile a whole years worth of bookkeeping.

Even though, bookkeeping is a dreaded and mundane task for most business owners, it is their greatest weapon when it comes to managing and growing their business. It is only their greatest weapon if it is up-to-date and transactions are logged correctly.

Here Are the 10 Common Bookkeeping Mistakes & How to Avoid Them

1. Improper or Poor Record Keeping

Improper and poor receipt and record keeping is common for many companies. We see it time and time again. Without a solid system in place, it is easy to lose receipts or forget about those small expenses that seem insignificant. Maintaining accurate records on a monthly basis and with a proper filing system can save you time and money on your income taxes, and more importantly stress. A solid bookkeeping and record keeping system can provide the necessary documentation in the event that you are audited by the IRS.

2. Improperly Categorizing Expenses

A common problem we see is that business owners hire or attempts to do the bookkeeping themselves with no formal knowledge of bookkeeping practices. Accurately tracking income and expenses in the correct categories ensures proper measurement of profitability. Knowing the different tax treatments of each income and expense category can result in significant tax savings, as well. Hiring a professional and knowledgeable bookkeeper saves time, stress, and MONEY!

3. Failing to Reconcile Bank Accounts

It is extremely important to properly reconcile your bookkeeping transactions with your bank statements every month. This will help to minimize errors and identify potential issues. One big issue is outstanding checks. Stale checks can bring many problems to your business. Check out our article on “Outstanding Checks: Are They Important?“.

4. Failing to Backup Business’s Books & Bookkeeping Software

We live in a world of technology and the cloud era. With our heavy dependence on technology, we need to be prepared for issues and failures with technology. It is extremely important to backup your books/data to avoid a potential lose. Have a backup of your backup to be on the safe side. With the ease of the cloud, online backups have been easy-to-do.

5. Failing to Account & Report Sales Tax

Many small business are overwhelmed with their bookkeeping. This leads to many businesses not reporting and not accounting for sales tax. This oversight can result in hefty fines and penalties. Also, incorrect recordkeeping may result in a higher total sales amount and could inflate the sales taxes due.

6. Misclassification of Employees & Workers

Most businesses often have a combination of both employees and independent contractors. It is important to know the difference between the two. Most businesses classify independent contractors when they really should be classified as an employee. Make sure these are properly classified to avoid misfiling, overpayment of taxes, and possibly hefty fines.

To learn more about proper worker classification, read our article on “Independent Contractor vs. Employee“.

7. Poor Petty Cash Management

Many business owners often operate with a small amount of petty cash, but they have little or no knowledge of how to track it. It is important to have a solid bookkeeping and record keeping system that allows you to track the cash kept on hand for the business and what it is being used for. Be sure to keep your cash in a lock box and receipts for all uses of the petty cash.

8. Improper Communication with the Bookkeeper

Your company’s bookkeeper, whether an employee or outsourced firm, is a more important asset than you think. It is even more important that employees and management communicate what is going on in the business with your bookkeeper. This helps your bookkeeper to create financial statements which reflect the true operational needs of your business. Also to make sure every expense and income is tracked properly.

9. Failing to Track Reimbursable Expenses

Many small business owners neglect to turn in expenses for the business that they paid out of their personal account. This is usually due to a lack of knowledge or system to track their reimbursable expenses. As time passes, there is increased risk that these expenses will be overlooked. If theses expenses are not reimburses, this can result in lost money, as well as, lost tax deductions. Be sure to create a policy to make it easy for your business to easily and consistently track and record reimbursable expenses.

10. Wasting Valuable Time & Resources

Some business owner’s do not get professional help with their bookkeeping because they are just cheap! I know that sounds harsh, but what they do not realize is they are wasting more money by doing it themselves. Most small business try to do the bookkeeping themselves or have their assistant do it. The number one problem with this is that they are not experienced enough to properly keep their books. The second problem is that they do NOT value their time. We all know that “time is money”. So why do business owners still insist on doing the books themselves? They just do not value their time enough.

Business owners need to focus on running and growing their business. The most successful business owners learn to delegate tedious tasks to experts and professionals. The main reason to hire a bookkeeping professional is it will save you money in the long-run. Bookkeepers know how and what to record properly. They will develop a system that will save time, money, and stress. A bookkeeper and your books are the greatest weapon to grow your business and show its financially stability.

Be among successful business and take the step to outsource your bookkeeping by hiring the professionals at SoCal Elite Accounting today!

About SoCal Elite Accounting

Bookkeeping Done Right!

Located in Orange County, SoCal Elite Accounting is one of the region’s most trusted companies. Working with SoCal Elite Accounting means receiving personal, professional and precise service. For years, we have served clients according to these guiding principles, establishing a reputation for careful, reliable and judicious service with companies throughout the region.

Our services are available for businesses in any industry, as well as individuals. We offer daily, weekly and monthly services that can be customized based on your exact needs. No matter the type of service you need, you’ll work with bookkeepers who are professional, courteous and experienced.

Contact SoCal Elite Accounting Today!

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