5 Bookkeeping Mistakes to Avoid That Can Cost Your Small Business Money

5 Bookkeeping Mistakes to Avoid That Can Cost Your Small Business MoneyIn a poll given by SCORE, 13 percent of small business owners said they dislike administrative headaches and time while 8 percent said they dislike all the paperwork. Can you relate? The truth is, if you make certain bookkeeping mistakes, you could be giving yourself a ton of headaches and paperwork. It is important that you track your financials in order to understand where your money is going and to minimize problems down the line. Do not be one of the many small business owners losing money each year to these, what could be, costly bookkeeping mistakes.

  1. Not keeping good records. Between managing clients and maybe even an employee or two, you’re busy; we get it, but we cannot stress how important good record keeping is. When all else fails, track everything. Even if you think you won’t need something, such as a $5 parking receipt, still track it and be sure to keep that receipt. Come tax time, you may be required to show proof of even the smallest expenses. As you track expenses, section them into different categories to help you understand where your money is going.

  2. Mixing personal expenses with business expenses. As a small business owner, it’s likely some of your personal and business related expenses overlap. For example, you might write off mileage you use on your family car to travel to client meetings. Regardless, have separate bank accounts and separate credit cards for expenses.

  3. Not seeking help from a professional. There are only so many things you can do on your own and there is going to come a time when you are unsure of something such as how to set up a general ledger. Whenever unsure, seek the help of a professional. Eventually you might figure out these accounting tasks on your own but would save a lot of time and headaches had you just asked for help in the first place.

  4. Failing to back up data. According to Gartner, only six percent of companies survive longer than two years after losing data. Backing up your data should one of your top priorities. This becomes a bookkeeping nightmare when all your carefully tracked records get erased.

  5. Incorrectly classifying employees. How you classify employees has a lot to do with taxes. It’s easy to get exempt and non exempt employee classifications mixed up. In short, exempt employees are your salaried employees who are excluded from minimum wage (but must past a few test to qualify such as making a certain amount). Non exempt employees are your hourly employees who must be paid, at minimum, the federal minimum wage. Non exempt employees are also subject to getting paid for any overtime they work.