You know what they say: nothing is certain in this world, except death and taxes. So no matter how hard you try to escape them, you’ll have to deal with them sooner or later.
We are not going to insist on the first one, because we don’t want to get all gloomy. But because we know it is always easier to prevent, than to correct, here’s a list of common mistakes made in accounting, for all bookkeepers to avoid:
- You are not working with a specific budget: It is very hard to assess the success of a business if you don’t set a clear budget. Establishing one can be very helpful in both outlining realistic expectations and avoid overspending. It’s also useful for assessing and correcting past records and accounts and establishing a stability between the past and present. Small businesses should be the first ones to create and work with a budget
- You don’t have a backup of your data. Whether you are using an accounting software or you are keeping your books the old-school way, you should always back up all your data, just in case
- You are mixing personal and business finances. It is wise to keep your personal and business finances separate, to avoid any faulty information or to get audited by the IRS. Also, in case you do get audited, you might be required to provide business records for certain activities, which are separate from all your personal affairs
- You’re not performing reconciliations of your bank accounts on a monthly basis. If however you make that a rule, you will be able to detect and correct any data entries, keeping everything accurate and avoiding future problems, especially when you have to calculate your taxes
- You are not keeping your books updated, which can lead to a series of problems, from unpaid invoices, to increased debts, all sorts of penalties and so on
- You are not tracking your expenses/income correctly, in the right categories, which leads to a smaller profit and smaller tax savings. All your records should be properly filed under the proper category and carefully administrated so there won’t be any mistakes related to how much and who you billed, whether the client has paid or not, etc.
- You don’t have a good management of your earnings. A lot of businesses take money from one account and use it wrongly on another account or without reporting that action. It is important to properly manage your earnings and know exactly how much of your profit will be reinvested back in the business.