Bookkeeping errors can stunt the growth of your small business, regardless of the strength of your business plan. Despite the gravity of those errors, they happen all the time. If you are new to owning a business, you are particularly at risk. Fortunately, you can learn from the mistakes of others. Check out these four common bookkeeping mistakes that put your small business at risk, and how to avoid them.
Failing to Track Receivables
No matter how great your business idea is, it will not be successful if you aren’t making sure that you are getting paid. This means that the drudgery of tracking receivables is essential for your success. Every time you send out an invoice, you record a receivable. This simply indicates that a customer owes you money. You can then check your listings of receivables to see whether customers owe you money. When you receive a payment from a customer, you should mark the invoice as having been paid. Seems simple enough, right? Well, the practice often gets neglected because small business owners are so busy taking care of so many other things. Those checks get left in a pile on the desk, and the receivables aren’t always marked down in a timely manner.
As a result, you end up with a bunch of money deposited in your account, and you don’t know where it came from. This can be a real nightmare at tax time. Staying on top of your receivables as you receive payments will make things a lot easier in the long run.
Failing to Keep Records of Expenses
Keeping receipts for all business-related expense purchases is extremely important. You may have a credit card statement for your business expenses, but how will you remember what each charge is for? Try keeping an envelope in your car or bag where you can stash receipts, and make a standing appointment once a week to scan those receipts and store them in the cloud. You can even use a mobile app to scan and store digital copies of those receipts as you go.
Failing to Track Cash Expenses
It’s easiest to track your business expenses by using a credit card or debit card, but sometimes you have to pay for things in cash. If you don’t keep track of those cash expenses, you can miss out on the opportunity to deduct them on your tax return. You might also overstate your cash expenses because you don’t have a record to verify them. Be sure to get receipts from vendors when you pay in cash, and consider logging cash expenses into cloud accounting software immediately if possible.
Failing to Hire a Professional Tax Preparer
Many small business owners think that doing their taxes themselves is an easy way to save some money. However, that often is far from the truth. A professional tax preparer has the expertise to get you all of the available deductions and make sure that no errors are made, which can have a significant impact on your total tax liability in the end. Go ahead and spend a little more up front to hire a professional to handle your taxes. It will make your life simpler and net you a bigger refund.
If you run a small business, you can count on Acceler8 for bookkeeping advice. We are your small business advisors. We can help you with everything from taxes to accounting, so give us a call today.