5 Common Bookkeeping Mistakes & How to Avoid Them in 2019
December 19, 2017 | Written by: Sohail Afzal
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
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
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.
Sohail Afzal, CPA, CMA, MBA
Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.