Bookkeeping means keeping a record of how much business money you have and where you spend it. You need to make sure that you assign each expense to the right category and check that everything is correct. It is important for all kinds of businesses. If you own a small business, you must keep track of your money for planning, decision-making, and taxes.
But the records only work if they are accurate and well-maintained. It is recommended to hire a bookkeeping service provider like Kagee Consulting. But if you’re starting on a budget, you might have to do it yourself. We can teach you how to be your own bookkeeper.
5 Common Bookkeeping Mistakes to AvoidÂ
Here are some tips to avoid the five common mistakes people make when managing their books:
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Combining business and personal expenses
When you first start a business, you may use your bank account or credit card to buy things for the business. Or you might use the business’s money to buy things for yourself.
Using personal accounts for business purchases can make it difficult to keep track of transactions. It can also make it hard to know which expenses are for the business and which are personal. It can cause problems when you must sort out your finances or claim tax deductions.
To avoid these problems, you can open a separate bank account for your business right from the start. It will make it easier to keep track of your business transactions and keep your finances organized.
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Not reconciling regularly
Reconciliation means ensuring that the transactions in your bank account match the ones in your books. It involves checking for discrepancies and ensuring everything is accounted for correctly.
It’s a good idea to reconcile your accounts each month. If you wait too long, it can be harder to keep an accurate record of your finances.
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Throwing away receipts
We usually throw away receipts for things we buy every day. But it’s important to keep receipts for anything you buy for your business. This way, you can prove that you spent the money on something related to your business.
We can recommend a tool that helps keep your receipts electronically and teach you how to use it.
Keeping your receipts makes it easier to add up all your business expenses when it’s time to do your taxes. It will help you claim all the deductions you have. And if the IRS asks questions about your tax return, you’ll have proof that your expenses are valid.
Keeping your receipts can simplify your bookkeeping tasks. By keeping the receipts for your multiple purchases, you can confirm that you assign them to the appropriate categories.
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Not categorizing expenses correctly
It is important to categorize your expenses in the right category. This can help reduce your tax liabilities and help you properly manage your finances.
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Manually managing your business finances
If you want to grow your business, it’s best to invest in a platform that will keep track of your business expense and income. As the owner, you should focus on the business instead of doing the bookkeeping work. Automating basic bookkeeping tasks will help you save time, prevent expensive mistakes, and let you focus on taking your business to the next level.
Learn how to do basic bookkeeping
Contact us today and get a free consultation for your small business bookkeeping services.