Making sure your books are accurate is crucial for any business. Mistakes happen, however there are steps you can take to keep them at a minimum. These are the 5 most common bookkeeping mistakes and tips on how to avoid them.
Mistake #1: Not Keeping Receipts
It’s easy to forget or neglect to record small expenses because they may seem insignificant, but they can add up quickly. Having a formula to properly document every single expense could save you a ton of money on taxes and be well prepared to face an audit.
Tip: Receipts should be meticulously organized by type, like travel or utilities, and sorted by date. Use a software or an App to scan and save them electronically. This ensures you always have a record and not overlook any deduction.
Mistake #2: Mixing Personal and Business Finances
Mixing personal and business finances should be avoided at all cost. Unfortunately, many small business owners fail to separate the two, therefore making tracking expenses and filing taxes more complicated and expensive.
Tip: Open a separate bank account for your business. Use business credit cards only for business related expenses. Taking this approach will simplify tracking your business expenses and revenue.
Mistake #3: Not Reconciling Bank Statements
Reconciling all your bank statements every month is imperative, neglecting it can lead to missed errors or unauthorized transactions. Regular reconciliation ensures your financial records are accurate.
Tip: Reconcile your bank statements every month. This helps catch discrepancies early and keeps your books accurate.
Mistake #4: Failing to Track Cash Expenses
Cash transactions are easy to forget, but they are just as important as other types of transactions. Every transaction should be recorded accurately and timely. Ignoring this can make your financial records imcomplete.
Tip: Record cash purchases immediately. Use an expense tracking app or software like Quickbook Online to ensure all transactions are accounted for, helping you manage your cash flow better.
Mistake #5: Neglecting to Backup Data
Many small business owners fail to properly backup their data. This can lead to losing your financial records due to a computer crash or cyber-attack. Regularly backing ups your data is vital to safeguard your information.
Tip: Use cloud-based accounting software that automatically saves your information, or set up a manual backup system.
By avoiding these common mistakes, you can keep your business finances on track. Stay organized, be proactive, and ensure your bookkeeping practices support your business’s success. If you need professional help, Reliable Accounting LLC is here to assist you!