Bookkeeping mistakes to avoid as a small business owner
Bookkeeping mistakes to avoid as a small business owner
A small business owner requires an effective bookkeeping for managing finance, ensuring the compliances are maintained and making informed business decisions. Some of the mistakes to avoid during bookkeeping:
- 1. Separation of personal and Business Finances
A small business should never mix his personal and business expenses. Mixing makes it difficult to track business performance. A separate bank account and credit card should be created for business.
- 2. Poor Organizations
It is very important for the small businesses to implement a consistent fillip system and also consider using digital tools .Failure of small businesses to keep receipts, invoices and other financial document organized can lead to errors and missed deductions.
- 3.Inadequate Record-Keeping
If the records of the books are inconsistent and not updated frequently this could result in inaccurate and incomplete financial data. The Business needs to set up a regular schedule for updating the books records eg:weekly basis or monthly basis
- 4.Ignoring account receivable and account payable
If the small businessman is not able to keep a track of how much he owes and how much he is supposed to reach then the businessman is unable to conscious decision .The businessman is supposed to review regularly and reconcile all accounts receivable and payable .All the overdue invoices should also be followed up properly
- 5.Reconciliation of Bank statements
A small businessman is supposed to regularly check the bank statements and compare it with the company’s books. If there is an discrepancies which are discovered a reconciliation could be done to solve the matter.
- 6.Improper recording of the revenue
Any revenue which are to be received should not be in the books until the amount is already earned. A businessman ignores this rule and record the revenue before it is actually earned .A businessman is supposed to follow accrual basis of accounting, recording revenue only when it is earned not when the cash is received .
- 7. Overlooking small transactions
Sometimes a businessman tends to ignore very small transactions with the mindset that these transactions are insignificant.it is very important to record all the transaction irrespective of its size so as to maintain regular accurate records.
- 8. Not backing up data
Generally small businesses has only one set of books of the company. In case of loss or disruptions the businesses are unable to refer their books. It is important to regularly back up financial data to prevent loss due to technical failures or other issues.
- 9. Handling of payroll correctly
If the business does not manage the payroll correctly this can lead to tax issues and employee dissatisfaction .An efficient reliable payroll software or consideration of outsourced payroll to ensure accuracy and compliance
These are some of the few common bookkeeping mistakes that a business man does ,to maintain regular, accurate financial records a businessman is supposed to solve these mistakes.
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