05 Bookkeeping Mistakes? that Can Detail Your Small Business Finances

Not all small business owners are fond of bookkeeping. Bookkeeping is no easy swim but an inevitable part of any business.  Most small business owners are DIY bookkeepers and find bookkeeping as a necessary evil. Small business owners struggle to toggle between bookkeeping, inventory management, invoicing, payables, receivables and a lot more, always on the table. That’s the reason why we can spot out common bookkeeping mistakes in small businesses!

In such a wild ride, bookkeeping is often taken for granted or procrastinated until tax seasons come around knocking.  Even though you hop on to accounting software like QuickBooks and Xero for your small business accounting, bookkeeping is something that you have to input from your end. If not done in a proper way, the bookkeeping mistakes will increase day by day!

If you are one of the small business owners falling behind on your bookkeeping, you are at the right place. This read will throw light upon how small business bookkeeping when improperly done hurts your accounting and eventually your finances. 

Small Business Bookkeeping 101

Before we dive deeper into small business bookkeeping mistakes that derail your finances, let us talk plain terms about bookkeeping and make clear the tasks you have to keep tabs on as a part of your bookkeeping and make the bookkeeping for small business owners smooth and organized.. 

Bookkeeping is the process of recording and tracking the financial transactions of your business on a daily basis. The bookkeeping chores start from billing customers, recording and organizing invoices, verifying and handling the payables and receivables, payroll processing, reconciliations to preparing balance sheets and financial reports.

These tasks may seem trivial compared to other business matters such as customer relationship management and marketing programs. But these are the building blocks of your business finances and are vital processes for any business.

Why Bookkeeping Matters

It is mandatory for every business to have an efficient bookkeeping system that is based on its accounting methods and principles. With precise and updated books, you can make more clear and data-driven decisions. You can foresee financial leaks and plug them before they happen. Also, you will be posted on the near-future cash flow estimate with which you can make arrangements accordingly. By chance, if you are a little unsure about how to do bookkeeping for a small business properly, you should always get bookkeeping tips for small business owners from any expert bookkeeper.

For all this to happen, you have to hone your focus on bookkeeping to get a fair view of the financial health and performance of your business. 

Bookkeeping Mistakes that Ruin Your Small Business Finances

Here are five common bookkeeping mistakes that small businesses ignorantly do in their bookkeeping. 

#1 Leaving out smaller expenses

In the rush of consistently recording major expenses and receivables in your ledger, you complacently miss out on trivials. Smaller receipts are often overseen and unfortunate to get into your books. Though you may not require small receipts below a certain threshold to file for taxes, smaller chunks when accumulated form a bigger piece of expense. 

Most importantly, these trivials may cause mismatches popping up at the time of financial closings. So, every financial transaction is privileged to get into your general ledger, no matter how small or big it is. If you are worried about having a tray full of paper receipts, you can even scan the receipts and keep them safe in a folder. However, track every single expense to get the maximum tax write-off. 

#2 Mixing personal and business expenses

This is one of the basics for sole proprietors and smaller start-ups. Getting a business credit card once you start your business is highly suggested. Otherwise, you will have to waste time sitting around with scattered records trying to sort out business expenses. This may lead to expensive errors and wave off potential tax deductions. 

Having a separate business keeps your bookkeeping friction-free, for both tax and logistical purposes. A dedicated business account will keep your financial flow transparent and easy to track. This helps you substantiate your business expenses when you apply for tax-write offs. Moreover, a separate business account can benefit you with a line of credit to fill your cash gaps. 

#3 Keeping inaccurate books

Inaccurate numbers in your books can cripple your business and finances down. You will never know the proper financial performance of your business and may end up making wrong decisions based on incorrect numbers. Manual bookkeeping is highly prone to errors. If your business still sticks to manual bookkeeping practices, it is high time you should hop onto bookkeeping applications that can automate your numbers and minimize bookkeeping mistakes.. 

There are hundreds of applications like PayTraQer for QuickBooks that can auto-record all your transactions from your payment gateways and e-commerce sites straight into your accounting software. Such applications completely eliminate your bookkeeping mistakes and you can just review the transactions and work on other business matters that need your presence. 

#4 Not keeping long-term records

Many small businesses throw off the records and clean up their computers right after the tax season. But there are some records that have to be stored for years and there are some tax regulations that require records of the past seven years. If you are hesitant to maintain ledger rooms and paper records, you have the hard disks and cloud storage these days. Make sure you have tightened security when storing your sensitive records on the cloud. 

Check with your tax authority’s regulations and store the necessary records for a friction-free tax process. These records will also help you compare your year on year profits or losses and to analyse them. You can substantiate these records to the investors too. 

#5 Procrastinating until the tax season

It is always very tempting to put accounting off until tax seasons come knocking. But this is a very dangerous misstep that most small business owners do. The longer you leave the receipts and accounts unnoticed, you’ll pave more room for accounting errors. So, get your books done before they cause damage to your business. Automated bookkeeping software can help you escape procrastination and keep your books balanced. 

Fix your bookkeeping issues

These common bookkeeping mistakes can potentially harm your business finances when left unnoticed in the long run. If you find yourself victimized by one of these bookkeeping problems, it is time to clean up your workflow, fix and optimize your bookkeeping. An automated bookkeeping application can solve most of the small business bookkeeping burdens. If you are using QuickBooks and haven’t tried PayTraQer yet, give it a shot. PayTraQer automatically syncs all your online transactions into QuickBooks as they happen. Try exploring our application with a 30-day free trial and save your regrets on bookkeeping mistakes.