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Friday 19 July 2024
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The 3 Biggest Bookkeeping Mistakes Small Businesses Make (and How to Avoid Them)

The 3 Biggest Bookkeeping Mistakes Small Businesses Make (and How to Avoid Them)

As a business owner in Broken Arrow, Oklahoma, you are likely balancing several tasks. Your plate is surely full, with tasks ranging from marketing and sales to product development and customer assistance. Understandably, maintaining bookkeeping may easily fall through the cracks. 

However, disregarding your records may have long-term effects. In this post, we’ll look at the three most common bookkeeping errors made by small businesses and offer advice on how to avoid them. If you need assistance, consider contacting an accountant in Broken Arrow, OK

Not maintaining separate accounts for business and personal expenses.

One common error that many small business owners tend to make is mixing business finances. This can lead to challenges, such as:

  • Inaccurate records

Combining business expenses makes it challenging to get an accurate view of your company’s financial well-being, which could impede sound financial decision-making.

  • Overlooking tax deductions

Failing to differentiate between business expenditures may cause you to overlook tax deductions.

  • Complications during audits

If the IRS conducts an audit, having records due to the mingling of business funds can make compliance more difficult. 

How to avoid it: 

  • Set up a separate company bank account and credit card.
  • Use accounting software to keep track of your revenue and spending.
  • Regularly reconcile your bank statements.

Not reviewing your expenses and books. 

Inputting invoices, receipts, and checks into your accounting software is simply the first step. Everything you submit to your accounts should be checked. The fancy term for this is reconciling. While it is seldom tough, it can be time-consuming and daunting at times. It is significant since it aids in the detection of both major and minor faults.

 If you unintentionally added a zero to an invoice when entering it, you may believe you have more money coming in than you actually have. A mistake in entering a receipt may enable you to claim a larger tax deduction than you are entitled to, exposing you to fines and penalties. Missing an inaccuracy in your checking account may cause you to lose track of the real funds you have available. 

Not hiring an expert. 

Most small business owners despise handling their bookkeeping yet insist on doing it themselves. Professional and competent bookkeepers have the abilities needed to complete the task swiftly and efficiently, as well as the experience to detect tiny errors that might otherwise go unnoticed. 

As professionals, they will be aware of any tax changes that may impact your day-to-day financial habits. In the long run, having a second set of eyes on your financial documents is highly advantageous, saving you both time and money.