Costly Bookkeeping Mistakes and How You Can Avoid Them

Bookkeeping can be tedious and time-consuming. But if you don’t properly maintain your financial transactions, you could lose track of your cash flow or face significant challenges during tax season. Here are some of the most common bookkeeping mistakes that can cost you money.

Mixing Personal and Business Finances

In the early stages of your business, you might feel obligated to pay for certain business expenses from your personal bank account. Don’t. This can be one of the worst bookkeeping mistakes that cost you money. Mixing personal and business expenses can leave you liable if your business should fail. At the very least, it can be challenging when trying to pay your income taxes.

Instead, open a business bank account. Most banking centers can even offer additional business services such as loans or lines of credit. But more importantly, you’ll keep your business records separate from your personal ones.

Failing to Organize Receipts

Keeping your business receipts is crucial for balancing your expenses. It’s also essential when looking to claim any business expenses as an income tax deduction. Many business owners make the mistake of thinking that small receipts for things like pens or stationery aren’t worth deducting. But even small expenses can add up.

Avoid this by developing a standardized system of keeping receipts. This is especially important if you have employees who make purchases in any capacity. Some electronic accounting systems offer receipt scanners so you can save electronic copies on record.

Manual Data Entry

Are you still entering financial information into a spreadsheet? Not only are these basic software programs inadequate for growing businesses, but they can also invite errors from those who punch in numbers by hand. These errors can be hard to track down after the fact, stealing focus from your core business processes.

Instead, invest in accounting software that streamlines these manual processes and minimizes manual errors. Some platforms even offer AI-powered solutions that pull information from invoices and receipts to eliminate the need to enter data manually.

Procrastination

The best bookkeeping practices involve reconciling your books monthly and keeping track of income and expenses throughout the year. Busy business owners can quickly get behind, but this can be one of the most common bookkeeping mistakes that cost you money. Left unchecked, you’ll lose track of your income, expenses, and company flow.

Avoid this by delegating your bookkeeping to another worker. Or consider outsourcing your bookkeeping to an external firm that offers industry-leading expertise at a fraction of the cost.

Failing to Chase Late Payments

Late or unpaid invoices can create problems for your cash flow. And if you don’t track them down early, these unpaid bills can quickly be forgotten or lost.

You can prevent this by setting clear payment terms with your clients. You might assess a minor fee for late payments or encourage fast transactions by offering discounts to clients who pay early.

Bonus Tip: Don’t Do It All Yourself

As a business owner, you have more important things to worry about than your back office. By partnering with a professional financial service like STG Accounting, you can focus on what you do best.

Want to learn how we can help your small business? Contact us today!