4 Bookkeeping Mistakes Every Small Business Owner Should Avoid
Bookkeeping is necessary for every business as it is the recording of all financial transactions. Many modern businesses are now using automated bookkeeping software such as QuickBooks Online. The software helps to simplify the bookkeeping process. With the help of technology, business owners can cut down on costs and allocate resources to other functions of the business.
Startup businesses need a good bookkeeping system in place to ensure that they are effectively keeping track of their finances without much effort. With that being said, there are some common mistakes that startup business owners usually make. Here are a few of them for you to keep in mind so that you can avoid them:
1. Taking Bookkeeping Lightly
Many small business owners do not take bookkeeping seriously. However, bookkeeping should never be taken lightly. You should know every little detail that there is to know about how bookkeeping works so that you can record each transaction that you make accordingly. There are many resources out there for you to learn from, including online resources, financial magazines, and many others. Try to look up the areas that you’re not sure about bookkeeping so that you have all the knowledge and skills necessary to complete the task effectively. You can even outsource bookkeeping to a professional if you don’t have time to learn the process yourself.
2. Not Having a Good Bookkeeping System In Place
Again, having an efficient bookkeeping system is the best way to kick-start your small business. With a good system set up, you can avoid human errors and mistakes that might occur if you do your own bookkeeping. Still, even with bookkeeping software, you need to keep track of your bookkeeping activities. You can do this by creating checklists that document your financial data, such as providing details about each transaction so that you can come back and recall the information if you need to. Don’t forget to constantly update your data and back it up every time you put in new transactions. Be sure to keep multiple copies of your business’s books in different places, such as on the cloud or USB drives. QuickBooks can also provide you with automatic backups to prevent data loss.
3. Throwing All Your Receipts Away
For every transaction that you enter into your bookkeeping log, you should have a receipt that matches with that record as well. However, most people don’t pay attention to smaller receipts for things such as business meals or office supplies. They only keep big receipts such as utility bills, invoices, and other important receipts. What you should know is that all your expenses need to be accounted for when it’s time for your tax returns. To make things easier for you, you can use QuickBooks with compatible apps that allow you to keep digital receipts through your smartphone.
4. Combining Personal and Business Spending
Another common mistake small business owners do is mix up the credit cards for personal and business use. You should always keep two ledgers separated from each other so that there are no mistakes when tax season comes around.
How you do your bookkeeping is up to you. You don’t need an automated bookkeeping system if you’re able to establish good financial habits. If you’re a small business owner, then it’s imperative that you have a good bookkeeping system in place so that you don’t lose track of your financial recordings.
Totally Booked offers bookkeeping by QuickBooks Certified ProAdvisors based out of NYC. Get in touch today to see how we can help!