Whether it’s a new computer that costs $900 or a $2 box of paperclips, you should keep track of all business-related expenses. Only saving the receipts for your “big” expenses is a serious mistake that will end up costing you in the long run. You have to remember that each of those small expenses will add up over the course of a year, allowing you to keep more money in your pockets and spend less in taxes.
Failure to Reconcile at the End of Each Month
It’s a good idea to reconcile your books at the end of the month to make sure they match your bank accounts. Reconciliations aren’t fun, but they are a necessary step towards preventing discrepancies. And if a discrepancy occurs, you’ll need to identify and fix it promptly; otherwise, the problem could snowball and affect other aspects of your financial documents.
Not Creating Backups
Remember the saying “it’s better to be safe than sorry?” Well, it holds true in the world of small business accounting. Hopefully, your financial documents will remain in tact, but if something happens to them you’ll want a backup copy on hand to continue your normal day-to-day operations. This is why it’s essential that small business owners create regular backups of their books. Assuming you use the Quickbooks accounting software, creating backups is a breeze. In fact, you can even set up the software to create backups automatically, eliminating the need to create them manually by hand.
Wrong Classification for Workers
As an employer, it’s your responsibility to classify workers correctly. There are to primary types of classifications for workers in the United States: employees or independent contractors. Employees generally have fixed schedules, whereas independent contractors work at their own according. In terms of tax obligations, employers must withhold federal and state taxes from employees but not independent contractors.
Lack of Communication
Keeping the lines of communication between you and your accountant, tax preparer, and employees/independent contractors is key to running a successful business. When the lines of communication break down, discrepancies may arise in the books, in which case you’ll have to go back and reconcile to find the problem. Whenever a change is made in the books, everyone should know about it.
What bookkeeping mistakes are you guilty of making? Let us know in the comments section below!