Running a small business means operating on a smaller budget, and that makes proper bookkeeping critical in preventing and ending unnecessary financial expenditures and losses. Keep an eye out for these costly bookkeeping errors to ensure your small business runs smoothly.
Not Keeping Receipts for Smaller Expenses
You need to buy a lot of different things for your business. Small business expenses often include minor purchases such as gas for travel, lunch on the road, and extra office supplies. Most small business owners know how important it is to keep track of receipts for expenses, but many frequently fall short on keeping track of the smaller buys. At the end of the year, you need to account for anything you claim as an expense, and you could end up paying a higher tax bill without the proof to back up what you spent.
Confusing Major Purchases with Immediate Expenses
Your immediate company expenses and major purchases vary, depending on the type of business you own. Chances are you regularly need to buy common items such as paper, pens, and other office supplies, or similar small items you should consider immediate expenses. Remember it’s not so much the amount you spend but the usefulness of your purchase and how long it remains useful that determines how you should classify an expenditure in your bookkeeping. If you purchase, for example, a microwave for the employee break area, you should record the equipment as an asset due to its potential for use over a long time span.
Modern technology makes it increasingly easier cut down on mathematical errors, but technology doesn’t automatically stop all errors from occurring, especially if you do day-to-day calculations by hand. You can easily fix small errors if you double check your calculations and fix them in a timely manner. Unchecked miscalculations can continue to grow, especially when paired with further mistakes. Failing to catch errors early on can lead to a calculating nightmare later, and this can potentially cause tax troubles for your business. Double checking all calculations and making sure to total amounts daily or frequently remain the best ways of avoiding costly errors.
Failing to Take Bookkeeping Seriously
Many small businesses fail to give proper record keeping due respect. Keeping detailed and accurate financial records is essential to the success of your business, and related tasks deserve strict attention and care. You can easily overlook small purchases, sales, or errors if you don’t take financial record keeping seriously enough. Failing to keep good accounting records in even one area of your business can create a domino effect on the accuracy of all your vital financial records. Keep track of everything and record all revenues and expenses properly to save both time and money in the long run.
Seek Professional Help
If you nor your staff don’t have the skill set necessary to properly maintain your books, you have several options available. You can get an accounting software program such as Quickbooks and receive tutoring in its proper use, hire an accountant, or outsource professional help.
At the end of the day, accurate financial record keeping remains a valuable asset for your small business. By following these tips, you can cut losses, maximize profits, and keep your business running smoothly.