Whether you’re running a small business or a multinational company, bookkeeping is one of the areas that you must dedicate special attention to. Proper bookkeeping can make small businesses manage their finances better. Without proper financial records, it can be difficult to determine the position of the business hence management and expansion will be a far-fetched dream for your small business. We’re here to help you expand by highlighting some common bookkeeping mistakes made by small businesses that you should always avoid.

Poor Record Keeping

Receipts are small documents that may appear insignificant but each of these is very important in the day to day running of your business. You can save time and money on tax filings by making sure all the receipts are available, including those minor expenses incurred within the month. Auditors might come knocking anytime and you’ll need those receipts to prove your income and expenses.

Poor Bookkeeping Practices

If you make mistakes in categorizing expenses and income, it might cost you significantly in the long run. It may happen if you hire someone without extensive skill and experience in bookkeeping. When the income and expenses are not properly tracked it means that you’ll get an incorrect figure on your business’s profitability. So always make sure you have the right people doing bookkeeping for your small business.

Failing To Invest In A Backup System

Technology can fail when you least expect it. Don’t store all your financial data on a single computer or server. Have a backup just in case you end up losing the data. You’ll avoid costly issues should the worst happen. Hire a bookkeeper today!

Poor Tax Filing

Some small businesses fail to account for and report some form of taxes when filing. Doing this only attracts penalties and fines which undermines the business’s profitability. If the data is not accurately entered, your business might end up with overstated taxes that are due. Avoid these errors and potential tax issues by having a CPA with experience handle your tax filing.

Poor Management Of Petty Cash

As a small business, you are likely to operate a small petty cash system but sometimes keeping track of all the money becomes a headache. It’s really important to keep track of the cash that is set aside for the business and what it will be used for. Ensure you have receipts for these small expenses so that you can keep track of how the money in the petty cash box is used.
Failing to properly distinguish between employees and independent contractors

When you are hiring people to get some work done, whether full-time, part-time or on a contract period, you need to really understand who is an employee versus independent contractor. Doing this will help you avoid misfiling or overpayment of taxes.
Paying expenses using personal funds

One common mistake that small business owners make is using their personal funds to cater for business expenses. What happens is that the expenses are overlooked. Additionally, you could miss out on important tax deductions that save your business money in the long run.