Top 5 Bookkeeping Errors for Small Businesses and How to Avoid Them
Being a stellar bookkeeper does not mean you are free from errors. Nor does it mean that you don't make mistakes. In fact, the opposite is true. Bookkeeping mistakes happen all the time.
The question is what can you do to minimize them? How can you assure that you are making the right bookkeeping decisions and that there are as few errors as possible when you are processing your business's financial data?
Consider these bookkeeping tips to help you avoid common bookkeeping errors for small businesses.
1. Not Properly Tracking Money
One of the top five bookkeeping errors small businesses make is not properly tracking money. Being able to track all income and expenses is crucial for a small business. Without proper tracking, it will be difficult to accurately report money due, or owing.
To avoid this error, small businesses should manage choosing bookkeeping software. They can also hire an accountant that can monitor and report on daily, weekly, monthly, and yearly financial transactions.
This will help to ensure that all income and expenses are correctly recorded. Establish an accounting system that includes dedicated accounts for each type of income and expense. Reconcile accounts to ensure that all reported figures are accurate. For additional security, physical backups of files are always recommended.
2. Not Filing Taxes
The repercussions of not filing taxes on time can be steep. This can include expensive fines, interest, and audit complications. To prevent this mistake, small business owners should create a reliable tax filing system. They could also make use of a calendar to track financial documents, tax forms, and filing deadlines.
Additionally, they should seek professional help from a qualified accountant or tax lawyer. This will ensure that taxes are being filed correctly according to local and federal laws.
3. Mismanaged Receivables and Payables
Mismanaged receivables and payables can be top bookkeeping errors for small businesses. Small business owners should prioritize tracking cash inflows and outflows. Make sure that the correct receivable and payable amounts are being reported accurately.
To avoid this, business owners should allocate time each month to focus on reviewing their accounts receivable and accounts payable. Businesses should actively manage their debtors and creditors. This will ensure timely payments and keep track of discounts and interest that may be applied.
4. Mismanaging the Inventory
It is important to understand the importance of accurate inventory tracking. This involves recording goods and services purchased or sold during the course of business.
Keep track of the quantity and cost of items purchased or sold. Control expenses and accurately report their financials. It is also important to have the proper system in place to track inventory levels. This will help to ensure that businesses have an accurate understanding of their current inventory situation at all times.
5. Not Keeping Accurate Records
This occurs when records are not kept up-to-date or are not properly organized. When this happens, it can result in inaccurate business financial statements, incorrect tax liabilities, and a lack of understanding of how the business is performing.
To avoid this error, every business should have an online bookkeeper. They are responsible for regularly reviewing and updating the financial records.
Bookkeeping Errors for Small Businesses: How to Avoid Them
Bookkeeping errors can be difficult to manage and, if left unchecked, could cost your business a lot of money. To avoid errors, small businesses should ensure they keep accurate and up-to-date records, implement audit protocols, and use bookkeeping software.
Taking these steps will help ensure your business books are organized and accurate. If you need help managing your bookkeeping, contact a professional today.
