5 Shocking Mistakes Killing Your Bottom Line

No business can escape the dreaded task of bookkeeping. While it’s definitely not one of the more glamorous parts of the job, bookkeeping is at the heart of small business success, which means errors can be crippling. To avoid the financial headaches that come with bookkeeping mismanagement, it’s important first to be aware of the pitfalls that can ensnare you.

Neglecting to save receipts 

Although keeping them in a folder or box is still necessary in the case of an audit, most online and digital accounting programs like QuickBooks Online and Xero have accompanying apps that allow you to snap a picture of your receipt and associate them with the appropriate expense entry.

Failing to properly classify employees

With so many independent contractors, consultants, and freelancers around these days, it can sometimes be difficult to determine who is on staff and who is not. Misclassifying employees and contractors can have significant consequences, including tax penalties and lawsuits. Review current IRS guidance for more info.

Poor communication

Whether you choose to hire a part-time bookkeeper or outsource the work to a professional, communication is the key to effective bookkeeping. Timely and clear communication helps to keep everyone on the same page and minimizes costly errors. Common lapses of communication include paying an employee a bonus (and not recording it) or buying supplies with cash and not informing your bookkeeper. 

Neglecting to reconcile

Reconciling your books with bank statements is a fundamental aspect of determining your financial health. It’s important to make sure it’s done properly and consistently. Reconciling your books helps you identify how much money you have on hand at any given time, and it also allows you to discover bank errors before they become major problems.

Failing to collect or deduct the appropriate sales tax

Due to the explosion of e-commerce over the last 10 years, sales tax has become a complex issue for many small businesses. Historically, the most common mistake is failing to deduct sales tax from total sales, which results in over-reporting income. Recent law changes have also made e-commerce sales tax collection more complicated. Make sure you and your bookkeeper are familiar with the latest rule changes, so you can remain in compliance and limit your overall tax liability.

We're here to help!

If you are searching for a tenured accountant and bookkeeper, we invite you to reach out to KG Virtual CFO. We provide secure cloud-based tax and accounting solutions, offering small business owners with the expertise of a CFO at a price that fits easily into their budget.