Often seen as a necessary evil, bookkeeping often takes hours of time for the business owner.
This typically boring and tedious task, when neglected can cause the downfall of many home business owners!
Bookkeeping, as mundane as it may appear, is actually the secret to success when it comes to business management and growth.
Although we all know that time is money, many business owners do not put enough VALUE on their time.
- Bookkeeping Is NOT A Waste Of Time
How you value your time is extremely important to your business. Proper (or improper) record keeping affect a business on an ongoing basis. Besides saving you time in the long run, it also sets you up to work your business like a business so it will pay like a business.
[dswa_button text=”Sign Up for the DSWA Newsletter” url=”https://dswa.org/newsletter”]
- Improper or Poor Record Documentation
Poor documentation and receipt record keeping is common for businesses.
It is easy to lose receipts or forget about those small expenses that seem insignificant. Maintaining accurate records on a monthly basis and with a proper filing system can save you time and money on your income taxes.
It can also provide the necessary documentation in the event that you are audited by the IRS. In case of a potential audit, accurate records of income and expenses could save you thousands of dollars.
- Improperly Categorizing Expense
If you or someone you have hired does not have the knowledge of formal bookkeeping practices, this can become a problem. Accurately tracking income and expenses in the correct categories ensures proper measurement of profitability. Knowing the different tax treatments of each income and expense category can result in significant tax savings as well.
- Not Reconciling Bank Account
Not having separate bank accounts for personal and business activities can become an issue. If you are audited, you may need to provide complete records of business related activities that are separate from your personal expenses.
Make sure that your bank statements are properly reconciled every month. This will help to minimize errors and identify potential issues.
- Not having Back Up
We live in a world dependent on technology. The dreaded hard drive failure is a when not an if. It is important for every business to back up their data to avoid potential losses.
- Neglecting Sales Tax
With many businesses, not reporting sales tax and not accounting for it is a common error in bookkeeping. Oversight in collection and reporting of sales taxes can result in significant amount of fines and penalties.
Alternatively, incorrect data entry may result in a higher total sales amount and overstated sales taxes due.
- Bad Petty Cash Management
Business owners often operate with a small amount of petty cash, but have little or no knowledge on how to track it. Be sure to set up a system which allows you to track the cash kept on hand for the business and what it is being used for.
Buying a petty cash lock box from your local office depot and obtaining receipts for all disbursements is a great way to start.
- Poor or Lack of Communication
It is important to have strong communications between the bookkeeper and employees of the Company. Keep your bookkeeper involved and integrated with what’s going on inside the business. This helps the bookkeeper to create financial statements which reflect the true operational needs of your business.
NOW is the time to make some easy changes to upgrade your bookkeeping system and turn this task into your secret weapon for business management success!
[dswa_button text=”Sign Up for the DSWA Newsletter” url=”https://dswa.org/newsletter”]