Bookkeeping is definitely one of those tasks in every business that falls in the love/hate relationship category. You love it when your books all match up correctly and every transaction reconciles, but you hate the task of actually doing it and getting on top of it. Errors and mistakes can happen very easily when it comes to bookkeeping and one small error can throw your books out completely.
There are a few common mistakes that business owners make when it comes to their bookkeeping which not only can cause headache and errors but it can also triple our workload and the time you spend on your bookkeeping. We have listed some of the common errors below to read through.
Mixing Business and Personal
When setting up your business it is very important to set it up with separate bank accounts. This is so that your business and personal finances are kept separate from each other. Although the business is yours and the money comes to you it still needs to be accounted for through the business, same with all the expenses for the business. Having your finances separate makes bookkeeping a lot easier. It means that all transactions through the business bank account are business related and can be reconciled correctly. Using your personal account for business related expenses not only means that the payments are not seen in the business account but it also means that you could be missing out on tax savings for those expenses.
Not having a bank connection
When you set up your accounting software it is advised to find one that can link to your bank account and have the bank feeds automatically coming through to your software. This means that each day ALL transactions in and out of the bank account are uploaded into the software and can be reconciled. You can set up rules and regular payments to streamline your reconciliations and save time. If you do not have the bank feeds set up the bookkeeping process can be a lot longer, you need to manually download the statements from your bank, upload into your software and go through and reconcile line by line. Most business owners do not have the time to do this on a daily basis which means you would probably do it monthly, sitting for hours reconciling a months worth of transactions is not fun in any ones books!
Not using the correct bookkeeper
Using a bookkeeper to keep your accounts up to date and accurate is a life saver. They handle all the transactions and only come to you if there is an issue or a transaction that they are unsure of. They do all the worrying about making sure the accounts are up to date and reconciled whilst you focus on the important parts of the business. However if you choose a bookkeeper who does not understand the needs of you and your business or someone who you do not fully trust than their work can be more of a hinderance than a help. It is important to take the time to find a bookkeeper that fits in with your business, understands your needs and is experienced in the work that you need them to be completing.
Leaving it till the last minute
As tedious and boring as bookkeeping looks, it is important not to leave it all until the last minute. Bookkeeping is a task that needs to be completed regularly. If you leave it all until the last minute and are left reconciling a years worth of transactions just before tax time you are bound to make a mistake or two. There may be transactions you can not find the receipts for or remember what they are for, there could be errors from rushing the reconciliations or you could simply not get it all done in time.
Bookkeeping is an important part of your business and one that you have to ensure is done correctly. If you are unsure on how to keep your books up to date or are not confident with it than look into hiring a bookkeeper to assist you. This is what they do, day in and day out. It is their stomping ground and the right bookkeeper will do wonders for your business.