Managing your own bookkeeping services can be an arduous task, especially if you’re new to the field. Obviously, keeping track of financial records and transactions is time-consuming, and even a minor mistake can have a serious impact on your business. From misclassifying expenses to failing to reconcile accounts, there are a variety of bookkeeping mistakes that can impact a business's financial health.
We understand that managing bookkeeping tasks on your own can save you a lot… right? but a little mistake can hurt your business in the long run.
In this blog, we will discuss the top-right mistakes to avoid when managing your accounting and bookkeeping services. By understanding these mistakes and taking proactive measures to prevent them, you can ensure that your business's financial records are accurate, up-to-date, and in compliance with all applicable laws and regulations.
Whether you're just starting out or have been managing your own bookkeeping for a while, these tips will help you avoid costly mistakes and maintain the financial health of your business.
You already know it... Bookkeeping involves recording and organizing all financial transactions of a business, and it is essential to keep accurate and up-to-date records to ensure that your business operates efficiently and profitably.
While hiring a professional bookkeeper can be costly, managing your own bookkeeping services can also come with its own set of challenges, and making mistakes can have serious consequences for your business.
Here’s a list of mistakes that a bookkeeper should avoid…
Usually, people avoid recording such small amounts but these can have a significant impact on your accounts. So, always remember that receipts under $75 serve as backup documentation for many deductions your company might claim for.
Not just this, but keeping receipts safe is necessary in the case of an audit. What? You're probably wondering how you'll keep them for an extended period of time. Don't be concerned!
Most online and digital accounting programs have applications that allow bookkeepers to take pictures of receipts while linking them to the appropriate register entry. However, if you prefer to keep the receipts separate, there are several third-party applications to choose from.
Whether you hire a part-time bookkeeper or hire a professional, communication is essential for effective bookkeeping because it keeps every individual on the same page and reduces errors. One of the most common mistakes is paying workers a bonus and failing to report it to the accountant. Another example is purchasing supplies without informing the bookkeeper or providing receipts.
Failure to keep track of reimbursable expenses is equivalent to throwing money down the drain. You can lose not only money but also deductions for taxes, which is essentially the same thing. Again, there are numerous apps and programs readily accessible to make such bookkeeping services simple and consistent.
Develop the habit of tracking expenditures as they occur – remember the longer your company goes without tracking, the more likely expenditures will be overlooked. Don't forget… tracking reimbursable expenses is equally important as saving smaller receipts. The former expenses allow you to maintain written evidence in the event of an audit, while the latter allows you to track your firm's financial health.
When you hire independent contractors for accounting and bookkeeping services, it can be difficult to identify who is on staff and who’s not. Don’t neglect this as misclassifying workers can have serious consequences, including penalties. Not just this, the businesses can suffer financial losses as well… if workers are misclassified as independent contractors, they may be responsible for paying taxes, interest, and penalties.
Above all, misclassified employees might be entitled to benefits including compensations they were not receiving previously. Hence, it is necessary for bookkeepers to properly classify employees – ensuring that the company complies with rules and regulations.
One of the key elements of determining your company’s financial health is reconciling the books with bank statements. The bookkeeping services provider offers reconciling help while assisting you identify how much money you have in hand. With reconciliation, you can easily identify bank errors before they become major issues.
Sales taxation has become an intricate problem for many startups as eCommerce has grown over the last decade. Historically, the most common error was simply failing to exclude sales tax from the total sales, which usually resulted in lump-sum tax surprises.
Of course, you don’t want that…
To add more, recent changes to federal law have made tax collection even more complicated when it comes to state-to-state fulfillment. So, make sure you are aware of the latest amendments to stay compliant while limiting your overall tax liability.
Petty cash should be managed and approved by a dedicated manager in each company that uses it. This reduces the likelihood of fraud and theft. To that end, companies should have clear policies concerning petty cash purchases. Besides, each purchase with petty cash should have a proper receipt for the expense in order to maintain clear documentation for tax deductions.
If this sounds difficult, hire someone who offers professional bookkeeping services.
While it may be easier for those just starting out to mix both business and personal spending, but bear in mind, it costs time and money in the long haul. This is due to the fact that you must sift through the account to locate your business transactions. It's even worse if you hire a bookkeeper to do it for you because you'll be paying for their time.
Additionally, keeping your transactions separate helps to reduce errors on your tax return. You should pay the correct amount of tax if you account for all of your income and expenses correctly.
Managing your own bookkeeping and accounting tasks can be challenging, but avoiding common mistakes can make the process smoother and more efficient. By keeping accurate financial records, reconciling accounts regularly, tracking expenses properly, properly classifying employees, and staying organized, you can avoid costly mistakes and ensure the success of your business.
While managing your own bookkeeping services can be beneficial in terms of cost savings, it's important to know when to seek professional help. A bookkeeper or accountant can provide valuable advice and guidance on financial matters, helping you avoid potential errors and save time and money in the long run.
So, if you need one by your side – get in touch with Aberny.