8 Common Bookkeeping Mistakes by Small Businesses

Mark Twain once said, “It isn’t what you know that can hurt you. It’s what you know for sure that just isn’t so.” Nowhere is that statement more applicable than in the world of small business bookkeeping.

Both veteran and new small business owners alike often think they know how to keep their books, yet make common blunders, causing bookkeeping tasks to feel far more treacherous than they should. While we can’t help you completely eliminate bookkeeping tedium, we can help you figure out what you know, don’t know, or think you know (but don’t) about small business bookkeeping.

Not Keeping Small Receipts

There’s a common misconception that you don’t need to keep receipts under $75 for tax purposes. While it is true that the IRS does not require that you keep them, these receipts serve as backup documentation for more significant deductions. Hang onto them. We don’t wish an audit on anyone, but if one occurs, you’ll have the necessary documentation.

Not Leaving a Paper Trail

It’s a digital world, but the IRS still likes paper. Digitizing your records is a great way to stay organized, but hang onto backup paper documents for at least seven years.

Not Tracking Reimbursable Expenses

Most small business owners are pretty good about keeping their business expense receipts. The trouble is they wait until the last minute to organize them. Track expenses as they happen. Why? You’ll reduce your workload, stay organized, and be less likely to forget write-off opportunities.

Misclassifying Employees

If you employ contractors and employees, ensure that you accurately classify your employees’ status. Otherwise, you may misfile taxes and overpay.

Not Maintaining Ongoing Communication with Your Accountant

No deadline? No progress. Most of us need a hard deadline as a form of incentive. Otherwise, we procrastinate, especially when it comes to taxes. Maintain an ongoing conversation with your accountant and meet at least twice yearly. Regular tax planning will help you manage your budget and tackle big bookkeeping tasks with small bites.

Not Reconciling Books

You can’t know where you’re going until you know where you are now. So reconcile your books and banking statements regularly. Not only will this tell you how much money is coming in and going out, but it’s also the best way to identify banking errors and outstanding debts from clients who may have slipped through the cracks without paying an invoice.

Backup Your Data

Most business owners use a mix of hard copy and digital tech to manage their records. Back up your digital data by transferring it to an external hard drive. Then, in the event of a hard drive crash, you’ll have already paved the path for a seamless recovery.

Not Knowing Your Own Limitations

If you find bookkeeping tedious and overwhelming or feel ill-equipped to do the job, outsource your bookkeeping to a professional. You save yourself a bundle of frustration—and you might even save money. In addition, professional bookkeepers work swiftly, know tax regulations, and may catch additional write-offs and mistakes you miss.

Need tax planning or booking assistance? We’re here to help. Contact us today!