If you’re a small business owner, you know that bookkeeping is both essential, and stressful. For those of you who have decided to keep track of your books on your own, you might actually be costing your businesses rather than saving money. Below we’ll explore a few common DIY errors, and the small business bookkeeping tips to help you save in the long run.
5.) Writing Off Items Incorrectly
Purchases must be logged correctly in order to provide you with accurate numbers when filing your taxes. For example, major purchases (assets that will be used over the course of a long period of time) are different than immediate expenses, and therefore should be dealt with differently. A major expense like a new printer/copier machine should not be written off as a direct expense, but rather should be depreciated over time.
4.) Failing to Keep Every Receipt
Keeping receipts for every business purchase is absolutely essential, and keeping track of said receipts months after the transactions is equally as important. Even the smallest purchases add up over time, and in the event of an audit, you want to be able to have proof of every nickel and dime you’ve spent.
3.) Taking Charitable Deductions
Though individuals can write off donations given to charitable organizations, businesses cannot. This is because businesses are often compensated in some way, be it recognition, advertising space, or some type of concession for said donations. If you do claim charitable donations while filing your taxes, it is likely that this mistake can lead to an audit.
2.) Lack of Supervision
Though we’d all like to think that the people closest to us can be trusted, it is seen all too often that when bookkeeping responsibilities are given to a friend or family member with accounting experience, the books don’t always add up. And in many cases, it can be years before this is discovered, if there isn’t a thorough system of checks and balances in place. Because of this, it is essential that ledgers be reviewed by a third set of eyes often, or that this responsibility be left to a professional provider.
1.) Going It Alone
As a business owner, you might think that keeping track of your books is time well spent, but in reality, bookkeeping is a time-consuming process that takes you away from the essential things, like growing and managing your business. Unless you have extensive experience in business tax law and accounting, this is something that you will either want to delegate to an in-house accountant, or to a professional.