The small business owner is often overwhelmed with responsibilities. Your list goes on and on, and there never seems to be enough time in the day to accomplish every task. We get it! Small business owners often tackle every role singlehandedly, and, for a while, this might work.
However, most business owners can’t do their primary job (growing their business) effectively if they take on too large of a load. After all, the jack of all trades is the master of none. This is especially true when financial tasks, like bookkeeping, are considered. Even innocent bookkeeping mistakes can cause compliance issues and data errors.
To help prevent these blunders from occurring to your financial records, we’ve compiled four common bookkeeping mistakes made by small businesses.
Let’s get started!
Mistake #1: Not Exploring All Your Bookkeeping Options
Small business owners often have multiple options when fulfilling bookkeeping needs. Unfortunately, some owners select a bookkeeping method without exploring which option best suits their business needs and capabilities.
First, the DIY route – briefly discussed in our intro. Performing bookkeeping tasks yourself is often not the best option unless you have extra time and plentiful financial experience.
Next, business owners can hire an in-house bookkeeper and trust this new hire to complete tasks efficiently. Although this option may be smart for some businesses, throwing all your eggs in one basket can be risky. For example, your new hire may not have a proper background in bookkeeping. If your bookkeeper makes an error, you have no one else to validate financials and make proper corrections; this is the risk of a one-man bookkeeping team.
Finally, small businesses can choose to outsource bookkeeping to a team of experts. This method often works excellently for small businesses that don’t have the fiscal resources to hire a team of in-house bookkeepers or the expertise to handle bookkeeping on their own.
Mistake #2: Relying on Manual Processes for Bookkeeping Tasks
Technology and automation have drastically transformed the amount of time it can take for a business to grow. When a small business opts to do their books manually, they neglect available resources that efficiently streamline the bookkeeping process (and save valuable time).
Wherever applicate, leverage the software available to you! For instance, your business likely receives bills and invoices to record and pay. In place of entering them one at a time, certain software allows you to import all necessary documents immediately.
Beyond using the software available, use an outsourced bookkeeping company to save the most time. Outsourcing your bookkeeping eliminates time spent completing tedious but important tasks like data entry.
Most businesses owners don’t know when to capitalize a purchase or when to expense it, yet the law demands they must. An outsourced bookkeeping team would have the proper background and experience to navigate these needs properly.
Mistake #3: Being in the Dark on Your Current Financial Status
When managing tight margins, a looming payroll, an incessant stream of bills, customer payments to apply and deposit, and receivables to call on, owners have better things to do than worry about if a check they just wrote will clear!
Cash flow is the engine that makes any company run. Without it, a business will not survive. This is why it is critical to know where your business stands financially at any given moment. You must develop an approach that provides a clear view of true operating cash requirements and indicates when the high and low cash balances will show in advance. Though this is advanced knowledge, it can be a critical tool if cash difficulties arise.
Establish an effective and reliable method to estimate the timeline of customer payments and the distribution of cash resources for bills and payroll. Map out scheduled cash disbursements and match them to the timing in which the receipts are expected.
This information should be regularly updated to maintain the most current financial status and trajectory for the future.
Mistake #4: Disregarding Certain Purchases
Somewhat ironically, small business owners can disregard both very large and very small purchases for a similar reason!
- Large purchases as often considered one-time expenses and not recorded.
- Small purchases, such as those under $75, are often ignored as insignificant to the larger financial picture. Even though small receipts may not be required by the IRS, they are important to save and track.
Both mistakes can convolute budgeting and cash flow. After all, large purchases must be accounted for, and small purchases amount to large sums over time.
Avoid Common Bookkeeping Mistakes with MyRQB
We often say that the key to business success is focusing on what you do best and delegating everything else. At Remote Quality Bookkeeping, we are dedicated to helping you obtain the information needed to make effective business and revenue decisions.
Our team of specialists provides cost-effective, efficient, and accurate bookkeeping services for small businesses and franchises throughout the United States. At MyRQB, we take care of all the back-end work and provide you with instant access to financial statements.
We partner with countless industries, servicing fourteen franchise brands including UPS Stores, US Lawns, Shelf Genie, Elements Massage, and Edible Arrangements, to name a few.
Additionally, our team at MyRQB utilizes specifically-tailored software to compliment how we operate, saving businesses time and money. Imagine having more time to focus on growing your business by delegating the following tasks:
- OCR for quick transcript and search
- Import automation
- Delivery management
- Data analysis
- Protecting client-sensitive information with credential and archival management
Anyone can enter bank transactions into an accounting software; however, it takes a knowledgeable mind to know where to claim that deduction, how to mitigate taxes, and not spark an audit.