Mistakes Can Cost You…
Small businesses face many challenges; competition, an uncertain economy, and unexpected expenses among others. When owning and running a small business, the last thing you want to do is create problems with poor bookkeeping practices. Here are some common mistakes made by small business and how to avoid them.
Not Saving Receipts
Everyone dreads tax time. Being prepared is the key to successfully maintaining small business finances and this means keeping everything, even the smallest receipt for purchases and expenses. The proper documentation will give you valuable backup for the deductions you claim.
Create a folder specifically for such expenses and be diligent about filing them regularly. You can also scan your receipts into a file on your computer so you still have a record of them even if something happens to the hard copies.
Improperly Classifying Employees
Independent contractors, consultants, and regular employees aren’t all the same. Making sure each is assigned the correct classification has a tremendous impact on your taxes and what you pay. When in doubt consult with your accountant for advice.
Your accountant is your most valuable weapon when it comes to business finances. Make sure they stay up-to-date on everything. Forgetting to provide receipts, not reporting employee bonuses or other vital information can create huge discrepancies in the numbers. Small mistakes your accountant may have to waste precious time tracking down.
Skipping an Accounting System
Even small businesses need accounting software to properly prepare a financial statement, projections and run things day to day. Don’t skip this important management tool. There are off-the-shelf products readily available that fit almost any budget. Ask your accountant what they recommend and what would work best for your business.
Small business owners wear many hats and it’s understandable that there may not always be time to enter transactions into your accounting software immediately. It is important, however, that you keep your records up to date. Establish a schedule to input information be it once a month or more often.
Owning and running a small business is a daily challenge. Arming yourself with the knowledge and proper tools can help make the journey easier for you and your employees. Avoid common bookkeeping mistakes like the ones above to ensure your business runs smoothly.
By Anne Capps
Executive Vice President – American Receivable