Top Bookkeeping Mistakes Business Owners Should Avoid
According to Dun & Bradstreet’s Small Business Division, about 90% of small business failure can be attributed to cash flow issues. Their studies of this subject matter reveal that many of the top bookkeeping mistakes can be avoided by hiring a professional to handle this aspect of your small business.
Comingling of Personal and Business Monies
One of the most common bookkeeping mistakes is mixing personal and professional finances together. Every business needs its own accounts that are used solely for the company’s transactions. This includes credit cards and other capital lines. It is difficult to gain a clear picture of the company’s overall financial health if dedicated business accounts are not utilized and if found that you are comingling funds you can be held liable for business liabilities in a legal dispute.
Utilizing Cash Rather Than Accrual Accounting
While cash accounting can appear more straightforward and easier to implement, it is difficult to attain a clear picture of the firm’s financial performance with this method. When the accrual method is used, a more clear and complete picture of the expenses and profits becomes apparent. Understanding the company’s true financial health is much easier when accrual accounting methods are used.
Incomplete or Incorrect Account Reconciliation
Many bookkeeping mistakes occur when reconciliation methods are completed in an inaccurate or incomplete manner. Taking the time to reconcile the business banking account with the books is a monthly task that many small business owners delay or do not complete. This is an important task that can reveal any errors or areas of concern that require a deeper look. If you are a business owner that does not have the time to do a thorough monthly reconciliation, it may be time to hire a professional bookkeeper.
Trying to Do Everything
A lot of bookkeeping mistakes can be avoided by hiring a professional. Many small business owners wear multiple hats and take on many of the business’ task in an attempt to keep costs at a reasonable level. This decision can end up costing owners much more than any savings that they may realize. A professional bookkeeper can provide accounts that are accurate and up to date, and help to free up time for the owner to focus on the business at hand. For more information on how you can hire a professional bookkeeper click here.