Getting Ready For Tax Season

What Are Some of the Biggest Bookkeeping Mistakes Made by New Business Owners?

Are you somebody who pays attention to detail, or do you tend to wing it, especially when it comes to numbers? It's okay to answer either way, as people are generally tuned towards one answer or the other simply because of their personality. If you're a relatively new business owner and you're definitely not detail oriented, then you may be less than attentive to bookkeeping matters. This is something that you do need to pay attention to, however, as you will need to account for your operation in due course and may find it difficult otherwise. What are some of the biggest bookkeeping mistakes made by new small business owners in your position?

Keeping on Top

Record-keeping can be a chore and it's easy to fall behind, even with the best intentions. Yet this is the most important task to help you keep on top of your finances and will need attention on a weekly, if not daily, basis.

Down to Detail

You may lump all of your expenditure into one catchall category. This is almost as bad as not keeping any records in the first place. Remember, some of those categories may be tax-deductible, while others may not be. If everything is in one pot, then you will have to start again from scratch at some stage in the future.

Segregated Accounts

You should always segregate business and personal use and, ideally, have two separate bank accounts. Some people don't and get into all kinds of trouble when they try to remember whether one particular expenditure was related to the business or not.

Data Backup

If you do maintain some form of bookkeeping, do you back this data up on a regular basis? You should always back up to a separate machine or, ideally, to a cloud account because a catastrophic failure could wipe everything clean.

Out-of-Pocket Expenses

If you are like the average business owner, then you may, from time to time, pay for certain minor expenses out of your pocket. If you don't keep a note of that on a consistent basis, then you will certainly forget and will not reimburse your personal account. You may end up paying more tax than you should, and this is never a good idea.

Tax Reporting

You will need accurate records if you are to account for your tax liability, especially when it comes to sales tax. Don't fall into a bad habit here, as you may end up having to pay fines or interest if you under-report.

Worthwhile Expense

When you're starting out, you may want to keep your expenditures as low as possible, and this is understandable. However, it's worth bringing in a professional bookkeeper, as they will certainly keep all your records in order and help you avoid many of the aforementioned problems.