Bookkeeping is one of the necessary evils every entrepreneur must deal with. It’s a tedious task that often takes up countless hours of precious time – which is the primary reason why well over 50% of small business owners do not update their finances on a monthly basis. Those who do often rush through the job – which can lead to costly mistakes.
Here Are the Most Common Bookkeeping Mistakes I See When Working with Clients:
- Commingling business and personal expenses
- Improperly recording payments made to themselves
- Inflating income by recording money transfers
- Writing off major purchases as immediate expenses
- Considering sales tax an expense rather than a liability
If it hasn’t already, at least one of these bookkeeping mistakes is likely to happen to you at some point. After all, you’re an entrepreneur whose expertise lies in growing your business by selling your product or service – not keeping the books. However, avoiding these and other common mistakes will save you time and money down the road.
Educate Yourself on the Basics of Business Financials and Develop an Understanding of Proper Bookkeeping Protocol
If you are still using paper ledgers or spreadsheets to keep track of your company’s finances, it’s time to upgrade to accounting software. Doing things “old school” leaves you vulnerable to errors that can throw off your entire bookkeeping system.
There are a number of simple cloud-based programs designed exclusively for small business bookkeeping. The software keeps track of invoicing, produces reports, makes it easier to file taxes, and allows you to link to your online bank account. User-friendly even if you aren’t well versed in accounting, these programs provide an efficient way to stay on top of your finances.
Outsource Your Bookkeeping if Needed
If you truly lack the time, interest and/or skills to manage your books effectively, hire a bookkeeper. It’s typically the first thing I recommend when I talk with clients about outsourcing.
As painstaking as the bookkeeping process is, it is your biggest secret weapon when it comes to business growth. Accurately and consistently measuring your company’s financials empowers you to effectively manage day-to-day operations – and plan for future success.