Small to medium-sized businesses in Broomfield, CO face many challenges. Accurate bookkeeping practices should never be one of them. While it is a necessary evil of running a business, the financial side can be tedious and mundane not to mention time-consuming. Keeping abreast of financials is the most effective way to promote business management and growth. Using a business bookkeeping service is a smart way to maintain financial health.
Accounting is not everyone’s cup of tea, and it is easy to make mistakes if numbers are not your thing. Here are some of the most common bookkeeping mistakes businesses make and how yours can avoid falling victim to them.
1. Poor record-keeping
Record-keeping is one of the most important aspects of business bookkeeping. From business expense receipts to employee payroll, failing to track financials will come back to bite business owners at tax time. Not to mention it can lead to unnecessary headaches – and quite possibly penalties and fines – if the IRS ever audits your business and you fail to produce the required receipts and documentation to back your claims. A common misunderstanding involves which receipts businesses should keep. Some are required by the IRS, while others are just handy to have at your disposal when accurately tracking expenses.
2. Categorizing expenses improperly
Categorizing and accurately tracking expenses is a difficult task. Businesses that use individuals who are inexperienced in bookkeeping best practices can quickly find themselves overspending and missing out on reimbursable expenses. It is difficult to gauge financial health if you do not have the most up-to-date figures available. Getting in the habit of accurately tracking expenses as they occur is the best way to keep from falling behind.
3. Failing to reconcile bank statements
It should go without saying that reconciling your bank statements to your financial accounts is a must-complete task. Not only does this help identify any accounting mistakes made by yourself or the bank, but it also helps provide an accurate accounting of disposable income.
4. Forgetting to back things up
No one wants to store years' worth of paper backups just in case their computer crashes, and we are all looking for ways to save trees! Fortunately, there are eco-friendly, secure, and reliable options for backing up your bookkeeping records electronically. We recommend using a secure cloud-based backup platform in addition to backing up your files on a local drive. Replication of data storage prevents the loss of your important information if one of your storage options should happen to fail.
5. Poor petty cash management
Most small to medium-sized businesses operate with a small amount of petty cash on hand. That is not their mistake. The problem occurs when they fail to keep track of where – and how – the petty cash is spent. Obtaining receipts for all purchases from petty cash is advised.
6. Improperly classifying employees
Depending on the size of your business, you likely have employees, independent contractors, or a combination of both. It is crucial to ensure all individuals are classified correctly to avoid misfiling or overpayment of taxes.
The solution to common bookkeeping mistakes
Working with business accounting professionals is the best way to avoid making any of these mistakes. Many of the common mistakes we mentioned in this article are made because business owners try to do the bookkeeping themselves. Bookkeepers in Broomfield, CO can keep your business from making costly mistakes. Our professional bookkeepers specialize in accounting and business advisory services. Get in touch with us today for a no-obligation consultation to discuss how we can keep your business from making these common bookkeeping mistakes.