When you are a small business owner, you are a boss, a manager, and an employee. The lines between these positions are more blurred the younger the business is. But as the business grows, your bookkeeping responsibilities will grow as well.
You might also need to attract potential partners and hire full-time employees of your own, which means that it’s time to kick your marketing efforts up another notch. In the process, your bookkeeping may get neglected, and you may commit terrible mistakes that can put your business in peril. However, by being aware of the most common bookkeeping mistakes, you can avoid them even as you face a hectic schedule.
Here are five bookkeeping mistakes that you will have to avoid:
1. Don’t mix business funds with your personal money
While your business is technically your property, that doesn’t mean you can take $1,000 from your business funds to pay for your Croatian cruise. You need to talk to an accountant who can help you set up a bank account or credit card for your business that is separate from the personal bank account and the credit card you have. The reason for this is to make it easy for you to monitor which of your expenses are related to business and which ones are personal. At the same time, having separate bank accounts for business and personal money will help you determine the appropriate tax deductibles and possible savings.
2. Don’t forget to integrate your bookkeeping with the bank
Small business owners need to integrate their bookkeeping efforts with their bank data to make it easier for them to track cash flow. To do that, they need to use cloud accounting software that connects to their bank details online. With cloud accounting software, you considerably reduce the need for manual data entry that is prone to human error. This means you don’t have to record the time and amount of money you have withdrawn or received as the accounting software will automatically store and record the transaction the moment your bank data changes. The added advantage of cloud accounting software is that you can access your business data anywhere, anytime, for as long as you have a working internet connection.
3. Don’t use accounting data the wrong way
As you have read previously, accounting software can go a long way in easing the burden of monitoring your business finances off your shoulders. But whether it’s Quickbooks, Excel, or other accounting software, it’s the individual who will use them which ultimately defines how well it will perform. Thus, you need to study your accounting software’s instruction manual in-depth to prevent costly mistakes.
4. Don’t hire a bookkeeper who doesn’t understand you
Outsourcing bookkeeping work can help lighten your workload so that you focus on more critical business tasks. But before you outsource your bookkeeping work, you need to do some research to find a bookkeeper who not only has a grasp of basic accounting and bookkeeping concepts but has the expertise, knowledge, and experience that is related to your line of business. Ideally, the bookkeeper you would choose should specialize in your particular industry. In addition, they should be someone whom you can trust.
5. Don’t rush your bookkeeping tasks
While you may have been able to get by while procrastinating and cramming for tests, this is a definite no-no and a recipe for business disaster. For every day that you put off a simple bookkeeping task, it accumulates. Chances are that you will realize too late the gravity of your procrastination days before the looming tax deadline. There is an increased risk of making mistakes when you cram your tax returns, which makes you prone to penalties. If you think you really have no time to do your bookkeeping regularly, then you might want to talk to Taxvisors in downtown Toronto to see what you can do.
If you’re looking for a professional tax advisor, Taxvisors is your best option. Get in touch with us today and see how we can help.