Nobody who starts a business does so for the bookkeeping. For most business owners, bookkeeping is a necessary evil that comes with the territory of being the boss. It’s a tedious task that nobody relishes, but at the same time, you can’t afford to make any mistakes with your paperwork; failure to properly balance your books could land you in serious trouble somewhere down the line. Everything needs to be accounted for and a properly balanced book could turn out to be your greatest ally.
Here are six bookkeeping mistakes that no business owner can afford to make:
1. Letting your backlog build
We’re all good at putting things off, but you can’t avoid bookkeeping forever as a business owner. It’s best to set aside a day at the end of the month to go through all your earnings and outgoings, rather than to just ignore this vital task for months on end. Doing so will only mean you have to spend even more time doing even more work when you eventually do sit down to do the books. This can result in you becoming complacent and not keeping an adequate grip on your finances.
2. Failing to keep receipts
Whether you put them in an old shoe box or categorise them according to colour, keeping receipts is essential when it comes to bookkeeping. They help you to prove purchases and explain outgoings.
3. Improper record keeping
Implement a formal filing system to keep track of your finances. If you ever need to be audited, you will be grateful that you took the time to keep records of your income, outgoings and expenses in order.
4. Not backing everything up
Technology is a blessing and a curse; it’s a handy way of storing information, but if your computer gets a virus, it has the potential to wipe your bookkeeping records. For this reason, it’s vital that business owners have a backup of everything. Email important documents to yourself and store all the vital information and documentation, including online receipts, on a memory stick and keep it safe at home.
5. Mixing your business bank account with your personal one
To avoid any confusion, you should establish a separate bank account for your business. It’s also a good idea to have a separate bank card for business transactions so you can make a clear distinction between business and personal spends. This will provide you with transparency when it comes to bookkeeping for your business, meaning you don’t have to sift through your personal spends as well as your professional ones.
6. Typos in your data entry
A stray comma or an extra “0” could mean that you completely miscalculate the value of certain vital aspects of your business. Everyone is guilty of typos, but when it comes to your bookkeeping as a business owner, you literally can’t afford to risk making a mistake when adding up the books.
This should not be constructed as advice and is guidance only.