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Bookkeeping Mistakes Made by Small Businesses
Most of the small businesses owners have little to no experience with bookkeeping, and they often make the same mistakes. Let’s see which the mistakes you should avoid if you are starting your own small business.
Most managers start a new business thinking about how much they know about their domain, and how they are going to make a lot of sales and profit. Most of them don’t pay attention to bookkeeping and don’t think it’s an important task, and as a result it always gets done on the last minute.
However, accurate and timely bookkeeping is not only required, but it is also essential for business management purposes.
Let’s take a look at the top 5 things you should avoid when doing your bookkeeping.
1. Keeping personal and business accounts in the same place
Many business owners make this mistake in the beginning. They are tempted to use their personal bank accounts for their new found business since they feel it costs less and it cuts the paperwork. But this is not recommended, especially after the business starts to grow. Keeping things clean and simple from the beginning is recommended, since this way you can avoid a lot of trouble later on.
2. Not keeping receipts for small expenses
Every little small expense needs to be kept, even if this may be difficult. The HMRC needs proof for each item expenditure claimed, even if it seems a very small one.
3. Not learning the basic bookkeeping software
This problem addresses especially to older business managers that own small, family businesses; they don’t have the time and energy to keep up with the new technology. But most of the small bookkeeping software packages are easy to use and will save you time on the long run.
4. Letting a backlog build up
When the business grows, you will find yourself concentrating on how to handle the important aspects of your business such as keeping up with the orders. If this is the case, tasks like bookkeeping will end up postponed. The best thing you can do is set up a bookkeeping system before the business is even open, when you don’t feel the pressure of other tasks.
5. Neglecting bank reconciliations
Bank reconciliation is an essential aspect of bookkeeping, even if most small business owners don’t even know what it is. If you compare your accounting records with your bank statements, you will be able to find and fix any errors that might have occurred. But if you don’t conduct this reconciliation, you might loose since there can be mistakes you have not noticed.
By following our advices, you will be able to make your bookkeeping with minimal expenses. This will help you keep order in your business accounts and keep clean, accurate accounts, so that when your business starts to grow, you can concentrate on what you always wanted to do: bringing the best products or services to your clients.