Your business is up and running. Product development has been completed and marketing strategy has been decided up and had your roll out has started. You are already beginning to see sales coming in – things are looking great. How’s your bookkeeping? If you are like most entrepreneurs, bookkeeping ranks really low on your list of your favorite things to do. Unfortunately, it is not something you can ignore or take lightly. Bookkeeping is your best weapon when it comes to business growth and management. Plus it is critical for legal protection and tax filing.
With that in mind, below is a list of some of the biggest bookkeeping mistakes small businesses, and small business owners) make.
No Bookkeeping at All: Let’s start with the most obvious one – you have no bookkeeping in place to track any of your accounts receivable, accounts payable, payroll, etc. You take all of your receipts, keep them in a file or a box, and have a simple Excel spreadsheet to make lists of income and expenses. This is not a bookkeeping system. This is chaos. It is so easy to lose or misplace receipts, forget about little expenses (like the box of pens you had to purchase at lunch time because you had nothing to write with any longer), etc.
You have to maintaining accurate records on a monthly basis, along with a proper filing system, for not only the health of your company but also for your taxes. Don’t be the person that goes to their accountant (assuming you have one) with a shoebox full of receipts and paperwork a week before taxes must be filed and expect him or her to work it all out. Be proactive and get a true bookkeeping system in place – or even better, hire bookkeeping outsource company to do your bookkeeping for you.
Lack of Knowledge: We can’t all be experts at everything. If your passion is artisan cheese making, or developing mobile apps, or construction work, it is highly unlikely that you are going to be an expert at accounting at bookkeeping as well. And that is OK, but it does mean you have to find someone who has the expertise and knowledge to do your bookkeeping.
Some business owners enlist their partner, family member, or friend to do their books. If that person has the experience in bookkeeping that is fantastic. But if they do not, then this approach is not always as cost-effective as one you may think. If they have the same lack of knowledge as you, then there is no advantage to this approach.
Other business owners purchase some off-the-shelf accounting software because it claims accounting proficiency in just a few steps. But unless you are familiar with general accounting principles, this approach can be frustrating and time-consuming as well. Your best bet is to find a bookkeeper with the knowledge and skills necessary to complete your books quickly and accurately. Leave the time-consuming task of bookkeeping to a bookkeeper. This saves you time, freeing you up to focus on growing your business.