Proper bookkeeping is vital to any business. As such, one cannot do it haphazardly or half-heartedly. Small business owners must meticulously record all their financial moves to help them make the right business decisions. Similarly, proper bookkeeping can help prevent stunting growth, clogging cash flow, and/or attracting undue attention from the IRS. With that in mind, do take care to avoid the following common mistakes:
Writing Entries When “There’s Time”
Considering how important bookkeeping is for your business, you should be more proactive with this task. Doing your books “only when you have the time” is a surefire way to lag behind with your entries. A few days can quickly become a few months, making backtracking even harder and opening the doors for mathematical errors.
It’s best to set aside time every week to do your bookkeeping. Creating a schedule helps you stick to that schedule. If time truly is a luxury you do not have, you may want to consider hiring a bookkeeping firm, such as BC Accounting, to handle your books for you.
Throwing Away Your Receipts
Many people throw away their receipts without a second thought. Hopefully, you aren’t one of those people. Keeping and organizing your receipts is your best bet when you need answers to any mistakes or gaps you may find in your records. Similarly, your receipts can offer additional deduction opportunities when computing your taxes.
Mixing Business and Personal Finances
Never ever mix your business and personal finances together. Doing so can muddle your records, making it difficult to keep track of what was used for business and what expenses are related to personal use only. Additionally, separating your finances into two different accounts makes it easier for the IRS to go through your financial statements. After all, they don’t have to decipher why you charged tickets to the latest Macklemore concert to your business.
Treating Bookkeeping as a Chore
Make no mistake; bookkeeping isn’t something you do “because you have to”. It’s more than just taking note of how your business is doing financially. Bookkeeping also serves as a powerful reporting tool, providing you accurate data regarding the business decisions you’ve made and how your business has fared since then. This lets you make adjustments as necessary to help your business thrive further.