Being your own boss has a number of perks, but it may also come with responsibilities that you dislike dealing with. If you are like a large number of entrepreneurs, then the task of keeping your accounting matters straight is on that list of dreaded obligations. You may also be guilty of making several bookkeeping mistakes that can affect your business’ profitability.
5 Mistakes You May Be Making
Not monitoring Your Petty Cash
Failure to properly organize your petty cash can cause overspending or simply affect your ability to track all expenses even if you do not overspend. You should therefore establish a specific petty cash sum, devise a process to report and support spending, and replenish your petty cash as it empties. Some companies even mandate a timeframe in which employees must follow the reporting process or absorb the cost themselves (for a higher level of compliance). Just remember, keeping good records and a close check eliminates the problem all together.
Having Insufficient or Inaccurate Supporting Records
Expense reporting will suffer if you are unable to support your spending. This means that all receipts and invoices proving why you spent money and how much must be kept. Additionally, this is a case in which quantity and quality are important, meaning that the information on these supporting documents needs to be accurate.
Failing to Track Expenses that Must be Reimbursed
It is possible to see a positive or good cash flow without having one, and this mistake actually accounts for one of the top reasons. Remember that reimbursable expenses have to be factored in when looking at your spending and what you have left, or you may over report your income for a given period. At the very least, you will have accounting errors to correct, but the problem may be even bigger depending on what report or period is affected.
Non-Reconciliation of Banking Transactions
Did you know that you can be unaware of your real cash flow even while monitoring your cash balances? One quick way to fall into this trap is forgetting to reconcile your bank transactions with your other cash movements. Therefore, while you may keep a close tab on the amount of cash you collect and the amount you have spent/disbursed, you could be overlooking returned cheques, overdraft fees and other bank charges. This means you may think you have more cash than you actually do.
Incorrectly Labelling Accounts
It may seem like a convenient short cut, but lumping expenses under a single category to make things easier can cost you in the long run. For one, it can make your bookkeeping messy and force corrections in the future. Plus, it may cause you to exaggerate your expenses in a particular category which could lead to:
- Improper reports
- Exceeding allow maximums causing some expenses to fall outside of tax brackets that would otherwise help you save.
Avoid these and other bookkeeping mistakes by entrusting the task to someone trained to do it. We can help you keep accurate records, improve cash flow, and remain compliant. Speak with us today.