Bookkeeping mistakes can lead to cash flow issues and tax problems for your business. The good news, however, is that if you can avoid or identify errors early on.
Mistake 1: Losing receipts
We’ve all lost receipts and resolved to never do it again – until the next time it happens! But it’s hard to keep on top of all those little bits of paper – and its even harder to find digital ones in your inbox! Receipts are important evidence required to back up the deductions you make on your tax returns. If you make a claim without a receipt and get audited, you can potentially be fined. Technology has made it easier than ever before to hang onto receipts. Take pictures with your phone and store them on your accounting software, Dropbox, Google Drive, ReceiptBank or Hubdoc. Tag receipts when they come into your inbox. And make a mental note (or a calendar entry) to check up on your receipt keeping once a month.
Mistake 2: Hiring an inexperienced bookkeeper
Some business owners make the mistake of hiring a friend, family member, or an inexperienced bookkeeper to manage their finances. However, hiring an inexperienced individual can land your business in a lot of financial trouble and lead to costly penalties. While you may be concerned about the cost, virtual CFOs are affordable and can actually save you money.
Mistake 3: Not staying on top of your financial reporting
Checking your income statements and balance sheets weekly is the best way to spot any mistakes and correct them quickly. After all, trying to investigate an error which occurred six months ago is never going to be straightforward. If you don’t have the time or resources to stay on top of your financial reporting, outsourcing these services is a great option to consider.
Mistake 4: Mixing business and personal spending
Paying for a business expense with personal funds might seem okay at the time, but in the long run, it can become messy. If your business is audited, you may be given a penalty. To avoid this, you need to ensure your business accounts are completely separate from your personal ones.
If you need help keeping your files and records organised and up-to-date, contact us at Propeller Advisory today for more information and advice.
