Updated: Aug 26, 2022
Due to a lack of knowledge of proper accounting procedures and regulations, many small business owners often make costly bookkeeping errors in their early years of operation. Here are 5 of the most common bookkeeping mistakes small business owners make.
Managing Your Books By Yourself
Money management is undoubtedly a crucial task and should be left for professionals to handle. If you don't have a reasonably strong background in accounting and business tax law, you shouldn't handle your own bookkeeping. Delegating this task to a professional will help identify costly errors and free up time so that you can focus on growing your business.
Going The Cheapest Route
Sometimes pinching pennies can save a business money; however, there is a point when being frugal can actually cost your business more money in the long run. The saying, "You get what you pay for," often tends to be true; therefore, it is usually best to spend a bit more and hire a quality accountant rather than go with the cheapest bookkeeper available. While most small businesses don't need to hire a CPA to handle their accounting needs, it is vital to hire an accounting professional who at least has an accounting degree or proper accounting certifications.
Failing To Save And Record Receipts For Minor Purchases
Misplacing or forgetting to record and save receipts paid with personal or petty cash for business-related purchases can add up to a loss of a significant amount of money, even to the most cautious business owners. At the same time, some might not find it to be a big deal and record transactions without receipts. However, in case of an audit, you won't want to answer to the IRS without the proof to back up every penny spent on business-related purchases.
Claiming "Charitable Contribution" Tax Deductions
Although individuals are allowed to write off donations given to qualified charitable organizations on personal returns, businesses have different limitations. Since companies are often given recognition such as advertising space or some other concession in return for their contribution, those donations are not truly considered "charitable contributions." If you make this bookkeeping mistake, the IRS will probably ensure you don't do it twice.
Not Keeping Your Books Up To Date
Failure to keep your bookkeeping current can be very problematic for any business. If you've neglected your books because your business is booming and you don't have time to tend to them, that's a sure sign you need to hire an accounting professional to get you back on track. Keeping your books up to date can help identify costly errors sooner and aid your business operations to be more efficient and cost-effective.
All in all, bookkeeping is best to be left to accounting professionals. But, thankfully, if numbers and tax laws aren't your strong suit, many accountants would be happy to take over your bookkeeping for you. Are you looking for someone to manage your books? If so, contact me today; I would be happy to assist you! I have a degree in accounting and am an Advanced Certified QuickBooks ProAdvisor. I specialize in working with clients who have QuickBooks Online, QuickBooks Desktop (Windows), QuickBooks Enterprise, and QuickBooks Premier. Located in Murrieta, CA, and servicing clients in Southern California and the greater Las Vegas, Nevada area.
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