Being accurate in your bookkeeping is essential to keeping your business running smoothly. If you don’t keep precise records, then an audit can turn into a nightmare that could end up costing the loss of your business. Being consistent and accurate means that you know what pitfalls to avoid. With that fact in mind here are several bookkeeping mistakes you should avoid.
Not Keeping Records
This bookkeeping mistakes speaks for itself. If you don’t keep records of transactions, how do you know why there was an expenditure or payment? You can rebuild what a debit or credit card transaction was for online, but if you pay cash, you are out of luck. Be sure to keep receipts and put them with the corresponding documents. Digitally scanning and saving your documents can be a lifesaver if someone accidentally throws them out or there is a disaster such as fire or a flood. Be sure to have all your financial documents saved in the cloud and a separate portable hard drive. Use the portable hard drive on a weekly or monthly basis and keep it somewhere secure away from your office when not in use. Having access to all your financial records is vital to the survival of your business.
If you want to really cause a headache at tax time, then count income as an expense and vice versa. It can also give a skewed version of your company’s profitability. Making it appear you are making money when in reality you are losing profits. You can clearly see how this can be an issue that could bring your business down. If you are having issues keeping expenses and income straight, there are a host of websites and software that can aid you in tracking both.
We touched on backing up documents earlier, but it bears repeating. In addition to floods, fires, earthquakes, tornados and other natural disasters that can wipe out your data, there are man-made threats as well. Hackers have made the news repeatedly by using ransomware. Some municipalities and large companies have had to pay significant amounts of money to get access to their data or start from scratch. Although the big companies and cites make the news when their data is held hostage, it happens to business just like yours every day. Backed up data makes getting rid of ransomware as easy as your IT department doing an uninstall and reinstall on the operating system. As previously stated, two of the best ways to secure data from harm is to back it up to the cloud and to a portable hard drive that can be stored at another location. We would suggest keeping your antivirus software up to date as part of the plan for securing your data.
Not Recording Reimbursements
If you are keeping books for a company that deals in transportation or has salespeople who are on the road often, you realize the importance of reimbursements. You may be the one who cuts a check for the employee who just spent $90 on gas transporting your products. Usually, in those situations, a check is given to the employee right away but is not always recorded. Reimbursements need to be kept track of just like receipts. You may miss out on some hefty deductions at tax time if your reimbursements are not recorded.
The Bottom Line
If you avoid these common bookkeeping mistakes, you will be ensuring the health and longevity of your business. The alternative is your company’s early demise.