Running a business can both be fulfilling and stressful. Seeing your idea turn into reality can bring a different level of joy. When you own a business, you are the boss of yourself, you can work according to your schedule, and you have more opportunities to help your community.
But being a business owner entails more than creating a product or service and marketing it. While creating a good product or service and making your brand known to your target market is essential to the success of your business, keeping an eye on your business finances and expenditures is just as crucial to ensuring that your business is running well.
Bookkeeping is one of the most important things you should keep tabs on as a business owner. As tedious as it is, bookkeeping is one task that all businesses are required to accomplish. It’s not the most glamorous part of being a business owner, but it is crucial to the success of every business
If you’re a new business owner, here are the most common bookkeeping mistakes that you should avoid:
Common Bookkeeping Mistakes You Should Avoid
Failing to Develop a Business Plan Before Your Launch
Planning is a crucial part of any endeavor, and that includes starting a business. When you have a solid business plan before you launch your business, you are assured that your company is ready for operation. Many business owners tend to increase inventory without first developing a solid business plan.
Your bookkeeping process and financial goals should be included in your business plan. It also should layout timelines, and the people who are in charge of a certain task. This can ensure check and balance as to who should be responsible for deliverables and when they should be ready.
Even if you own a small business with a one-man operation, you can prevent your business from going down under when your business plan includes a clear and specific bookkeeping schedule. Remember that being prepared is always better.
Poor Organization Skills
It’s common for small businesses to encounter problems with record-keeping. If the business has limited manpower, the owner automatically takes on the task of keeping tabs on expenses. However, it can be very challenging for a business owner to keep track of finances, update inventory, and take care of employees all at the same time.
When it comes to bookkeeping, staying organized is key to being on schedule and staying stress-free. So, before you even launch your business, you should already know when and where to file your receipts. You can always utilize technology to organize your receipts. You can take a picture of your receipts and keep the image to ensure that you always have extra copies of important documents.
Using Personal Accounts to Run the Business
Some small entrepreneurs assume that using their personal accounts to operate their businesses is an ideal thing to do. However, doing so can cause issues and delays when audit time comes. And if you want to run your business successfully, it’s always a good idea to avoid having problems with the Internal Revenue Service.
Not Having A Defined Budget
Every small business owner knows that cash flow is limited when it comes to running a small enterprise. For those who have just launched their business, making a profit may take time. Therefore, it is essential to ensure that your cash flow is transparent, organized, and within budget.
Before you create a defined budget, audit all your expenses so you can get a clear picture of the cash flow within your business. When you have a defined budget, it’s easier to keep tabs on your expenditures and transactions, which makes bookkeeping less of a hassle.
Failing to Categorize Employees
There’s more to bookkeeping than inventory and raw materials. Businesses should also consider the type of employees who are on their payroll. In general, most businesses have full-time employees and independent contractors. Make sure to properly classify everyone’s employment status so that there wouldn’t be any concerns when it’s time for filing.
Neglecting Sales Tax
Most small business owners forget to collect or deduct the correct sales tax. It’s a common mistake in bookkeeping, but it’s something that can cause your business a huge deal of money. This mistake can lead to penalties and fines that might be hard for most small businesses to accommodate.
So, before you launch your operations, make sure to learn about how taxes, especially sales tax, work. This will help you avoid neglecting or forgetting to file the necessary taxes for your business.
Using Petty Cash as a Personal Wallet
Some small business operators regard petty cash as free money or something they can use for anything related to the business. While that can also be true, remember that petty cash isn’t a personal wallet. Even if you’re the business owner, you still need to track all transactions involving petty cash. Keeping track of petty cash isn’t that complicated. You can simply use a cash box and put it next to the register to keep it in check.
Not Having a Back-Up
The technology involved in bookkeeping can be challenging for many people, even for business owners who have been running their operations for a few years. If you don’t know how to use a bookkeeping program, you might miss or delete essential data. That said, it’s crucial to always have a backup for your files. Consider making a hard copy of your books so that if anything happens with your computer, you can still accurately update your finances.
Taking on a Project Without Enough Knowledge
While most business owners hate bookkeeping, many still insist to do it themselves, and there is nothing wrong with that. However, bookkeeping is a professional career for a reason. It involves processes that can take years to master. If you don’t have ample knowledge when it comes to bookkeeping, you can always outsource bookkeeping services to help you keep tabs on your business finances more efficiently without the stress.
If you want to ensure that nothing goes wrong with your bookkeeping, it’s always best to leave it in the hands of professionals. Licensed and professional bookkeepers can finish the job quickly and efficiently, and they also have the experience needed to identify and troubleshoot errors that you might have missed. As professionals, they are also aware of the changes in tax laws that could affect your business’ financial practices.
Savvy Financials Bookkeeping Services
Having professional people to keep track of your financial records will benefit your business by saving you time and money. So, if dealing with numbers is challenging for you, Savvy Financials can help you with bookkeeping for your business. We’ve been providing full-service accounting and financial services for business owners in Utah since 2011. Contact Savvy Financials today to learn more about our bookkeeping services!