Before
getting into a discussion of common bookkeeping mistakes, it is
worthwhile to address the importance of sound bookkeeping in general.
The
importance of sound bookkeeping is frequently lost and ignored by
management. It is apparent that the main reason management tends to
ignore the bookkeeping function is because it is focused on the “big
picture.” What management fails to recognize is that there is no “big
picture” to look at without bookkeeping first doing its thing in the
details.
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| Bookkeeping |
Bookkeeping can
help keep your business organized and able to yield a profit. Many
small businesses fail due to poor financial management. By applying
sound financial principles, you may be able to prevent this fate from
befalling your business.
The following are some of the benefits that are generated by an accurate bookkeeping environment, as noted by QB Express:
1. Improved financial analysis and management
Cash
flow management is something that your business should start focusing
on right away. Once your invoices are delayed, there will be zero
follow-ups on customer payments. With accurate bookkeeping, you can
systematize your follow-ups and be invoicing, while making on-time
payments to suppliers.
2. Fulfil your tax obligations on time
Bookkeeping
can help you keep a track on all the information required to accomplish
your tax obligations. When the time for tax comes, you will no longer
need to rush everywhere to hunt for your bills or try to remember your
expenses. An organized Balance Sheet, Profit & Loss, and Cash Flow
also make filing your Tax Returns a lot easier. Your tax advisor can
also finally give you some sound tax advice instead correcting incorrect
entries in your financial statements.
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3. Enjoy easy reporting to your investors
With
regular and accurate bookkeeping, you will no longer need to worry
about reporting to your investors and sharing the financial status of
your company. From graphs to charts and the lists of data, you can
easily present everything to your investor right from your accounting
books.
4. Make informed business plans
With
the Balance Sheet and Profit & Loss statements, you can check if
your company is on the right track financially. Based on your financial
status, you can make informed and effective business plans.
5. Keep a proper record, as required by the Law
With
bookkeeping, you can keep a record of all your financial dealings and
keep everything organized right from your big to small invoices.
Common Bookkeeping Mistakes
The
foregoing section above focused on a discussion of the benefits that can
flow out of a sound bookkeeping system. Such a system shouldn’t be
taken for granted, however. Frequently, bookkeeping mistakes can creep
in and weaken the bookkeeping infrastructure as well as the systems in
the organization that relies on the bookkeeping system.
The following is a list of common bookkeeping mistakes that bookkeepers and others should always be on the lookout for.
1. Skipping an Accounting System
As Business2Community notes,
your business may be so small that you decide to save money by not
using software that is specifically designed for accounting.
However,
even if you use spreadsheets and a well-organized file system to keep
track of where your money goes, you are missing out. As Doug Boswell, an
accounting expert, points out:
“…before having your taxes done, the tax preparer needs to cobble
together some sort of makeshift system that will allow your tax return
to be prepared, but it almost surely won’t capture all your deductions.”
2. Not Double Checking Everything
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| Not Double Checking Everything |
Another good point from Business2Community:
adopt the habit of double-checking everything and be consistent about
it. As their report notes, a mistyped number, a lost receipt, and other
human errors can result in inconsistent figures. Prevent such problems
from piling up by reconciling your records with your bank account
statements every month. Keeping track of your businesses money will be
easier if you try to use cash as little as possible. Credit and debit
transactions will show up on your statements so you know where every
penny goes.
3. Jumbled Invoices
Some small businesses miss
out on money because they have an inefficient system for filing
invoices. Number your invoices and keep them in order so it is easier
for you to find out which invoices have been paid and which still have
outstanding balances.For Accounting services and Financila plan read here Accounting Services Arizona
4. Not reconciling your accounts
As this analysis of sound bookkeeping observes,
after the end of each month your bank, credit cards and even merchants
like PayPal will release statements showing your beginning and ending
balances as well as all of the transactions that occurred in that month.
Take those statements and reconcile your accounts in your bookkeeping
software. Not reconciling your accounts each month can lead to errors
that copy over month after month.
5. Not tracking Mileage
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| Business2Community |
Remember: you can be reimbursed for
the miles that you drive for your business. The IRS sets a mileage rate
for businesses each year that covers your gas, maintenance to your car
and general wear. Use an app like MileIQ that will track all of your
drives and then you can categorize them as the business or personal. At
the end of every month, they’ll send you a report showing how many
business miles you drove and what that amounts to. You can take that
amount and reimburse yourself from your business account while
categorizing it as a business expense. Not doing this prohibits you from
claiming this eligible deduction on your taxes.
In addition to the previously noted mistakes, the following links point to additional common bookkeeping mistakes.
In conclusion, it’s fair to say that the fewer bookkeeping mistakes
there are in your organization the smoother your organization will
operate. It is human nature to seek short cuts and avoid pain points,
but this is a crucial area where you can’t afford that approach: you
must take a long way and endure the strain of the process, otherwise
much bigger pain points could arise down the road.
Read complete post here: Tax And Accounting Services in Northern Arizona
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