We get it. Bookkeeping is a chore. It is a chore that takes time and energy that could be focused on growing and building the business. As bookkeepers, we have seen it all. Here are six common bookkeeping mistakes we see businesses make:
1. No process to review financial transactions
Even small businesses receive and spend a lot of money. Errors happen–be it honest mistakes, human error, being overcharged or double billed, or outright theft. These errors can cost the business quite a lot over time. These issues are almost always caught if the books are reconciled each month.
2. Not setting up a bookkeeping system
Many businesses think they are small enough or that their transactions were not voluminous enough to require a bookkeeping system.
Some businesses opt for spreadsheets rather than specifically designed accounting software, such as Quickbooks, Sage, Waveapps, Xero, etc.
While spreadsheets may work in some cases, they won’t cut it for most businesses. Spreadsheets almost always result in missed deductions at tax time. They also have to be manually complied, which means that the data cannot be used throughout the year to evaluate how the business is fairing.
3. Not reconciling financial accounts
Even some businesses with bookkeeping systems fail to accurately reconcile financial accounts on an ongoing basis. Other businesses do not reconcile financial accounts at all. There is a reason why bank, credit card companies and even merchant accounts like PayPal issue monthly statements. The reason is that it is easier to correct errors or problems if 30-60 days has passed. It is much harder to do so if more time has passed. The monthly statements issued by bank, credit card companies and even merchant accounts like PayPal should be reconciled at least quarterly.
4. Not separating personal and business income and expenses
Some small business owners run their personal and business income and expense thru one checking account. This can make it very difficult to prepare accurate financial statements and to prepare tax returns. At a minimum, the time and effort required to fix this problem results in higher bookkeeping and tax preparation fees.
5. Not tracking invoices and payments
It is common for businesses to focus on the deliverable or service they provide. This is how they earn money. But many businesses fail to focus on invoicing and collecting for the deliverables or services they provide. Having an invoicing system that makes invoicing easy and unpaid invoices visible is critical to a business’ success.
6. Not tracking mileage
Miles driven for work are deductible by the business. Business owners can reimbursed for these costs. The amounts can add up fast. Many businesses and owners miss this deduction as they fail to track their mileage.
Get Help With Your Books
We help businesses across the country with bookkeeping and taxes, but we focus on providing bookkeeping in Houston, Texas. Call us today to see how we can help, (832) 915-1040.