Don't Make These 5 Bookkeeping Mistakes

For many small businesses—especially those that are just getting started or low on extra cash—the task of bookkeeping may not be possible to outsource. This means some business leaders may have to take on bookkeeping themselves, which can often be a boring and menial process to uphold. Bookkeeping is vital to businesses of any size, as it helps companies evaluate their financial records, make decisions, prepare their taxes, and get ready for the future.

However, books are only helpful in guiding all of the above items when they are accurate, detailed and well-maintained. Not being able to hire a certified or professional bookkeeper can lead to mistakes being made or the books not being properly kept. This can lead to other consequences later down the line which can prevent visibility of the company’s progress and success or miscalculations. While they may seem small at times, these mistakes can have a large impact on how businesses file their taxes and plan for future goals.

Here are five major bookkeeping mistakes to avoid, and what to do instead:

• Losing track of your receipts. We all do it in our everyday lives—we forget the receipt at Target or say “no” when asked if we’d like to keep a receipt from a store. It can be easy to forget about or throw away receipts, especially for small purchases. However, keeping track of your receipts is very important for later on when it’s time to categorize your expenses or score some sweet tax deduction deals. 

Instead, make sure to keep your receipts either in a digital folder on your desktop or paperclipped in your desk cabinet. Each time you file them away, make a small note of what the receipt is for so that you can keep track of what you’re spending, and where. You can even scan your receipts and keep them in an accounting software that can keep track of all the numbers for you.

• Not communicating clearly across your team. The bookkeeping process is rarely a one-man show, unless a company is really strapped for budget. If there are multiple people managing your bookkeeping, it can be easy to let things get lost in translation.

Instead, be sure to communicate clearly what exactly you’ve done, and how exactly you’d like each process run. This way, nothing gets accidentally duplicated, and you can ensure you’re not doubling the work for each person on your team.

• Failing to separate your personal and business accounts. Mixing personal and business accounts is actually more common than you’d think, especially if the business is first starting out and the company is bootstrapping. While it may be tempting to celebrate a first sale or big win with drinks on the company card, it’s probably best to keep a distinct boundary for each account, and what they’ll be used for.

Instead, set your boundaries from the start so that you and everyone you hire on afterwards has a clear picture of what accounts can be used for certain purposes. This includes any petty cash for things around the office or odd items for everyday use. Remember that even the smallest purchases can start adding up more quickly than you originally anticipated. By differentiating your accounts, you can make sure you keep track of business expenses that can be categorized as tax write-offs and benefit you. 

• Not regularly reconciling your books with your monthly bank statements. Reconciliation is when you match your bank statements with what your books, or ledger, say. If the balances match, they are successfully reconciled. However, this can only happen if your books are up-to-date and all errors are accounted for. Online banking has made this process easier, as it’s connected with digital accounting softwares that can help keep track of your finances without the risk of human error.

Instead, set the same date each month in which you’ll take the time to reconcile your finances. The longer you go ignoring reconciliation, the harder it may be to keep an accurate idea of how well you’re actually doing.

• Not checking for mistakes. This sounds easy enough, but can actually happen often. As humans, we make errors all the time—When it comes to bookkeeping, common mistakes include entering the wrong number, wrong date, or wrong category for a cost. In some cases where your accounting software is connected to your bank, simple mistakes can double the entry of a cost or receipt.

Instead, have a process in place to double check your bookkeeping without having to double the work. Have someone tag team with you or make the time to make sure each date, cost, and amount has been entered correctly. While accounting softwares can be extremely reliable, it can be helpful to try to do the math on paper as well to make sure your calculations add up on both ends.

Ultimately, there are many ways to make sure you have as accurate of a bookkeeping process as possible. But there are always things that can get missed along the way. Eventually, it may be time to consider hiring a professional bookkeeper to handle everything. It’s a smart investment as they can also offer the correct advice and guidance, which can in turn help you grow your business.

Speak to our certified bookkeepers today to get a better picture of just how we can help you and your business.