Running a small business means you have a lot of tasks to juggle. You’re balancing employees and inventory, making social media posts, or even trying to take down test orders for your products. There are always things to focus on and check up on.
One thing many entrepreneurs need to remember to focus on is their bookkeeping. It can mean your company’s business financial statements’ accuracy is compromised. You might even find yourself committing bookkeeping mistakes at times. The good news is that avoiding these bookkeeping mistakes for small businesses is easier than you think.
Keep reading to learn the common mistakes and how to avoid them.
1. Failing to Track Reimbursable Expenses
Failure to track reimbursable expenses is one common mistake. These expenses that an employer pays in full for an employee, such as travel, meals, supplies, and other reimbursement forms. Business owners must track these expenses to ensure they can be appropriately claimed as a business expense on taxes.
To avoid this mistake, create a system that allows you to track all incoming and outgoing expenses. Ensure that all receipts related to these expenses are stored in a secure, organized place. You can start choosing bookkeeping software for managing financial data.
2. Failing to Classify Employees Properly
Failing to classify employees correctly is another mistake. Having the correct classification for employees is critical for tax purposes. It can prevent costly fines.
Small businesses must maintain accurate records to see whether employees are contractors or employees. The classification dictates if the company must pay itemized taxes or the typical taxes associated with a regular employee.
To ensure proper classification, check federal and state labor laws for guidelines. Also, review the pay periods, job descriptions, and employer-employee relationships. Ensure each employee has a proper timesheet, job history, and a signed contract for work.
3. Not Securing Data Backups
Another mistake is not securing data backups. Data loss can cause costly delays in operations. It can also lead to numerous problems, such as inaccurate financial records. It can cause significant issues for your business.
Companies should always have a secure and functional backup system, such as cloud-based solutions, to prevent this. Data should be backed up regularly. Testing the backups is vital to ensure all data is accounted for and saved correctly.
4. Neglecting To Review Financial Statements
Neglecting to review financial statements is one of the common mistakes. It can have serious consequences.
Business financial statements provide a detailed insight into the business’s financial performance. It also tells the current financial health of the company. A business owner must review them regularly to accurately assess the company’s financial position and make informed decisions.
5. Not Hiring an Experienced Bookkeeper
Not hiring an experienced bookkeeper is one mistake that can lead to many issues. With a trained eye, it can be easier to identify errors in data entry. The lack of a bookkeeper can also leave your books susceptible to fraudulent activities.
Outsourcing for bookkeeping services can avoid this mistake. Look for a qualified bookkeeping firm or experienced online bookkeeping. It can ensure accurate financial records, regulatory compliance, and improved operational efficiency.
Avoid the Common Bookkeeping Mistakes for Small Businesses
Bookkeeping mistakes for small businesses can be costly and time-consuming. To ensure a successful business and a tremendous financial outlook, learn the five common mistakes and how to avoid them.
Contact an experienced bookkeeper for advice and guidance.
For more help with your business, check out our other blog posts.
