Yeah, yeah, I know. You HATE doing your Books every month!
When you went into Business for yourself, your focus goes into creating and growing your Business! The last thing you want to do is work on your Bookkeeping!
This tedious, but necessary task is so important just like the engine in a car. Without it, your Business will not operate smoothly. When your Books are in order, you will have much more clarity about your Business which will help you make sound financial decisions!
Below you will find some of the most common Bookkeeping mistakes Small Business Owners make. Now that you know them, you can easily avoid them or make the necessary changes in your Business.
1. Not separating Personal from Business
This is a big no-no.
How can you keep up with your Business expenses if everything is commingled in ONE account?
Not only is this confusing, but also risky when filing your Business Tax Return with the IRS. The IRS requires that your funds are separate and if your Business Tax return were ever audited, some of your deductions could be reduced or denied if your personal and business funds are commingled! Make sure to keep your accounts separated. It will reduce confusion and save you tons of time since you don’t have to separate personal and business transactions every month!
2. DIY Bookkeeping (don’t shoot the messenger!)
I am all for the DIY’er Small Business Owner! I am one myself. Since I created my Business, I have always tried to learn how to do all the technical things in my Business. I created my website, all of my social media pages and the workflows. I am constantly researching and consuming content to assist me in becoming more efficient. So I understand and sympathize with anyone that wants to try to do everything yourself. But Bookkeeping should not be one of them unless you truly know what you are doing. Not doing your Bookkeeping correctly can costs your Accountant several hours of clean up at Tax Time and it can cost you deductions. There are so many potential deductions when you start your own Business and you don’t want to leave any on the table.
3. Thinking you DON’T have to keep your receipts.
I have heard this time and time again from Business Owners telling me that their Accountant told them they do not have to keep receipts. This is untrue and according to the Internal Revenue Service, receipts are still required. If you were ever audited on your Business Expenses and did not have the proper receipts, your deduction could be disallowed!
Please keep your receipts!
There are several online softwares you can use to help you. Most Accounting Softwares (Quickbooks, Wave, Xero, etc) has receipt keeping features where you can snap a picture and the receipt will attach to your expense transaction. Google Drive is also a great free feature where you can download the Google Drive app and take the receipts there. Whatever option you chose, just make sure that when you take the receipt and all necessary information is there such as the Date, Amount and Category.
These are simple, yet common mistakes Business Owners make regarding their Bookkeeping. As the great late Maya Angelou says, “When you know better, you do better.”
If you have any questions feel free to reach out!