Top Bookkeeping Mistakes Small Businesses Make

It is pretty widespread that startups and small businesses tend to manage bookkeeping activities by themselves. It is usually the business owner who takes the responsibility of bookkeeping and maintaining the book of records by himself on a daily basis. Often people consider bookkeeping to be the act of noting down transactions.

In the actual scenario,  that is a lot more to bookkeeping and it requires the fundamental knowledge of accounting. Business owners come from diverse fields and some of them are not even acquainted with the field of finance. It would be quite genuine if such bookkeepers were making mistakes.

Table of contents

• Top bookkeeping mistakes small businesses make

1. Trying to do everything by yourself

2. Improper classification of employees

3. Not storing a backup of data

4. Not keeping track of reimbursable expenses

5. Discarding the receipts of small purchases

6. Not communicating correctly with the accounts team

7. Failing to perform regular reconciliation

• Summing Up

Top bookkeeping mistakes small businesses make

1. Trying to do everything by yourself

It is a common practice among startup owners that they tried to manage most of the tasks by themselves. The business owner might take up bookkeeping in his own hands to avoid the cost of a bookkeeper. This may lead to various bookkeeping mistakes as the business owner is from a different field and unaware of the bookkeeping concepts.

2. Improper classification of employees

It is important to properly classify each employee working under you. You need to segregate the full-time employees, freelancers, interns and so on. Each employee is given a different degree of freedom in the company and there are certain privileges that are applicable to a particular group of employees. If the segregation is not done properly it will create hurdles in accounting as well as payroll.

3. Not storing a backup of data

The accountant must make sure that he has a separate copy stored in a different location so that even if some software malfunctions take place the data is safe with the firm. Losing the data can be used for the firm,  as the entire bookkeeping process needs to be repeated and a lot of receives can be misplaced. This can mess up the company’s account and create huge damage.

4. Not keeping track of reimbursable expenses

Each reimbursement must be tracked according to the date given by the provider. You must actively approve the provider and ask for a replacement if the amount has not been admitted to the company’s account. All the details should be preserved until the refund is credited to the company’s account. Do not rush and delete the information necessary for getting the refund.

5. Discarding the receipts of small purchases

Do not discard the receipts of small purchases thinking that it is insignificant for the accounts of the firm. Sometimes there are certain limits which are reached only with the help of such small receipts. Even if you don’t need to include them in the account for a while, just store them and avoid discarding them.

6. Not communicating correctly with the accounts team

You must communicate with the accounting very clearly and crisply. Make sure that you note down the minutes of the meeting and send them via email to your accountant to make sure that your accountant doesn’t miss out on any point. Any valuable information should be shared via written mode and you must wait for the acknowledgment of the accountant.

7. Failing to perform regular reconciliation

You must reconcile your book with the bank’s statement on a regular basis to determine the company’s financial health. You must ensure that this is done on a regular basis and with utmost care. This also gives a clear picture of the company’s cash flow and the cash that the company has in hand at any given time.

Summing Up

If you are looking for a bookkeeper or an accountant to deal with your bookkeeping requirements, you can reach out to us at 123financials. We follow a dedicated recruitment process that involves background verification and a series of interviews to get the best candidate for you. If you wish to carry out bookkeeping by yourself, you might need an accounting consultant for helping you out.