Unlike large companies, small businesses have constraints when it comes to finances and human resources. Thus, the end owner wears more than one hat and also takes care of the back office.
Let’s avoid stressful bookkeeping for small business mismanagement. It is essential to be aware of the bookkeeping mistakes that can cripple your business.
1. Ignoring small purchases:
Businesses incur different types of transactions daily. Bookkeeping requires the recording of every transaction. Often, small businesses ignore small purchases.
Smaller purchases like new office supplies or filing cabinets can add up to a lot of money. One must not address them as personal expenses but instead record them in the books on the same day. Bookkeeping services for small business helps to avoid such mistakes.
2. Not saving receipts of amounts less than $75:
Such receipts ideally are not required by the IRS, they serve as backup documents to claim the deduction. It can be helpful at tax time.
3. Improper classification of employees:
With the increase in flexibility and mobility, nowadays businesses have different categories of employees working on various projects. You have freelancers, independent contractors, and consultants on the team. Improper classification can end up with you in legal proceedings and tax penalties.
Pay attention to this. Outsource to professional bookkeeping service for a small business like us. We at Meru Accounting have dedicated, experienced and qualified professionals on board.
4. Not doing reconciliation:
Reconciliation of the books of accounts and bank statements is one of the fundamental aspects of the bookkeeping task. It should be done every month to know the financial health of the business.
Often businesses fail to perform reconciliation either due to time constraints or lack of knowledge. Here, experienced bookkeepers like us can help without damaging much to your wallet.
5. Failing to track the reimbursable expenses:
Small businesses often make some payments for expenses out of their own pockets on behalf of their clients. As these expenses are chargeable back to the client, most business owners fail to account for these expenses. As a result, they fail to track reimbursable expenses and lose money and tax deduction as well.
6. Not having a backup:
Cloud accounting has prompted business owners to go paperless and remote access to books of accounts 24/7. There is no requirement for hard copies of all the things in a business.
But no matter whether you decide to go paperless, you still have to keep up the paper trail, documentation, or backup documents on your PC. You may experience technical glitches and end up losing important information.
7. Not deducting Sales Tax:
The emergence of e-commerce businesses has made sales tax even more complex for small business owners.
They often make mistakes of not deducting sales tax from total sales, increasing sales figures, and higher taxes on that. Moreover, the changing rules of digital goods sales and tax collection have increased the complexity of sales tax.
Hiring a bookkeeping service for small businesses like ours can be a great help.
8. Lack of communication:
Someone handling bookkeeping is effective only if they are filed and updated with all the financial transactions.
Often, the mistake is paying a bonus to someone and not reporting it purchasing and not providing information to the bookkeeper.
9. Stalling Bookkeeping:
Bookkeeping is not an interesting part of the business venture. Many individuals consider it a boring task and avoid it.
However, it is an essential routine activity of the business that should be done without delay. It helps to keep accurate and proper books of accounts. It prepares you for any pitfalls that may happen in the financial statement.
10. Doing to yourself:
No matter how daunting the task is, many small business owners insist on handling the books themselves. When a professional bookkeeper handles the books, it can be beneficial.
They have the necessary skills to complete the job quickly, detect errors early, and make recommendations.
