If you’re an entrepreneur who has recently started their own business, you may be feeling overwhelmed by that growing pile of bookkeeping work.
Of course it’s possible for anyone to learn the fundamentals, but what entrepreneur has the time to do their own bookkeeping accurately? It’s easy for those without a financial background to make mistakes that can compound over time to affect your entire workbook. For instance, forgetting to enter even a single expense can result in you misstating your profit margins and net income, among other metrics.
Let’s look at bookkeeping mistakes entrepreneurs commonly make and how to avoid them.
Bookkeeping Mistakes That Can Put Entrepreneurs at Risk
Here are some bookkeeping mistakes small business owners should avoid.
1. Failing to Keep the Books
New businesses start with just a few transactions. But these will (hopefully) grow rapidly, with the owner likely unable to find time to establish policies and procedures to maintain the books. This often results in receipts being stuffed into boxes, if they’re retained at all, with business expenses left unclaimed or, worse, forgotten.
Not having a proper filing system can also result in receipts getting lost.
Remember, proper documentation is necessary for CRA audits and to generate accurate financial reports. This is why at a minimum it’s necessary for entrepreneurs to have a solid online bookkeeping record. There are a variety of invoicing programs to make it easy and convenient to scan and save important receipts.
You’ll also need to put in the time and effort weekly to maintain your bookkeeping and accounting. If you don’t have the time, hire an online bookkeeping service provider to help you develop an efficient recordkeeping system suited to your business’s needs.
2. Mixing Personal and Business Expenses
When setting up a business, never combine business transactions and personal finances. This can lead new business owners to financial and legal problems. Having a single bank account for business and personal expenses makes it difficult to track specific entries, especially when preparing taxes. And no one should be relying on their memory to keep track of their credits and debits.
Setting up separate personal and business bank accounts allows you to keep track of your business transactions, ensuring your year-end tax preparations are easier to tackle.
3. Not Leveraging Technology
Does anyone still do their bookkeeping on paper? And many business owners even find Excel spreadsheets inadequate for modern bookkeeping.
Entrepreneurs are best off using bookkeeping software. There are many programs that are easy to use and can be synced with cloud services so they can be accessed from anywhere at any time. Using these programs also saves you the headache of having to track everything manually which is a tedious, time-consuming task.
4. Not Seeking Help
As a new business owner, your time is valuable, and as your company expands, the demand for that resource is bound to increase. Although you could learn how to manage your own books, other aspects of your business will inevitably take a backseat.
Here are two additional reasons why you should consider hiring a bookkeeping service.
● Save Money and Time
Most teams of professional bookkeepers will have experience in business management and accounting. Since their primary job is daily financial management, they’re well-versed in its regulations and systems. They can also educate you or your accountant on compulsory bookkeeping and accounting laws applicable to your business. Additionally, they can efficiently manage all bookkeeping tasks, allowing you to save money and time as well as prevent errors.
● Reliable Financial Reports
How can any entrepreneur generate accurate financial reports, let alone ensure their business’s growth, using inaccurate bookkeeping methods? By hiring professional bookkeepers, you can identify problems and loopholes in your existing financial system, take necessary measures to expunge them, and set up a more reliable one. The result is financial reports you can depend on to take strategic actions and ensure your new company’s growth.
Now you can confidently review your company’s accounting process, as you’re aware of the common bookkeeping mistakes to avoid. By addressing these issues you prevent future mistakes and ensure your system works efficiently. There are numerous programs available that will save you time and money. But hiring an online bookkeeping service allows you to strengthen your bookkeeping and overall accounting.