Are you aware of the fact that a lot of small businesses have incurred huge debts due to simple bookkeeping mistakes? Do you know that most businesses are self-employed? This means that they are the ones who make basic bookkeeping mistakes most of the time. Do you know that there are ways to fix these mistakes?
Hiring a Professional
Bookkeeping can be simple if done properly. Mixing personal and business spending is quite common among small businesses and bookkeepers, especially among solo-professional bookkeepers. Even though, the majority of small-business owners have personally hired a bookkeeper, have seen it first hand in big corporations as well. If you are not sure whether spending is personal or company-related, you must ask your bookkeeper for an opinion. After all, he or she is the only one who knows if your finances are coherent.
Several small-business owners think that hiring a bookkeeping professional will be too expensive. What they don’t know is that there are several inexpensive yet good bookkeeping software available in the market today that perform similar functions as the more expensive ones. Most small-business owners are still not sure what they should have on their books. The following tips are designed to make sure that you will end up with the best bookkeeping software for your small business.
You should hire a professional bookkeeper for the sake of your business. Since you are the owner of the business, you are most likely to commit the mistakes mentioned above. Thus, you must take the necessary steps to avoid such things from happening again. This is where good bookkeeping software comes into play.
Terms and Definitions
You must familiarize yourself with the terms and definitions before using them. One of the most common bookkeeping mistakes is the failure to create separate accounts for inventory, sales, expenses, and banking transactions. There are different kinds of bookkeeping software packages you can choose from. Make sure that you get the right kind of software for your bookkeeping needs.
Another mistake that some business owners make is mixing personal and business finances. There are two sides to every coin, after all. When you mix your personal and business finances, chances are you will fail to achieve the desired results in your bookkeeping. You might even experience bad debt as a result. Make sure that you separate your finances based on which you will manage them.
One of the most common bookkeeping mistakes people make is not preparing for tax time. If you do not prepare your books by the end of the year, chances are you will be audited and you might even have to pay a penalty. If you start preparing your books early, you will be able to avoid the penalty. Make sure that you learn about the common bookkeeping mistakes and avoid them as much as possible.
One of the most serious mistakes you might commit would be claiming an expense when you do not incur such an expense. You must keep accurate records. Bookkeepers must always be reminded to double-check their calculations. Some businessmen believe that it is unnecessary to maintain business accounts books. While it is true that maintaining business accounts books is not essential, it is always better to be safe than sorry.
The next mistake you should never make is ignoring the sales tax and payroll taxes. Most accounting books will advise you to reconcile your receipts with your tax returns every year. In addition to this, it is advisable to keep track of all tax payments made throughout the year. If you ignore tax payments, you may face penalties on income tax returns and capital gains tax return as well. A tax expert can help you deal with these problems, so make sure you talk to one as soon as possible.
Not making proper use of debit and credit cards is also a very bad move to make. A lot of companies make the mistake of not keeping proper records, and they often run up huge debts due to this. A good accountant will help you keep track of expenses, and he will show you how to make sure you use your cards to the best of your advantage.
Finally, one of the most common mistakes made by accountants is not making use of the bank statement and journal for their financial reporting. A lot of bookkeepers think that an occasional statement in the journal is enough, but you would be much better off using the journal entries for recording your expenses. This is because such entries are more truthful and genuine than personal expenses reported in your bank account. If you want to know your net worth without the hassle of asking for personal details, pay attention to what is recorded in your financial statement. This is the best way to avoid any unnecessary mistakes, so make sure you keep track of all your bookkeepers’ errors at the end of each year.