Often, small business owners do not have many resources available at their disposal. Because of these, they may need to wear many hats and address problems at the back office. Bookkeeping is a task that they could end up procrastinating. Bookkeeping may seem like a simple task to tackle, especially if a business owner is familiar with bookkeeping practices. Small business owners may choose to manage the accounts themselves to save money. Unfortunately, there are many possibilities for mistakes that can cost the success of their business. If you are a business owner who wants to avoid the headaches and stress that come with bookkeeping mismanagement, you should hire Phoenix bookkeeping services. Professional bookkeepers can help you understand the common pitfalls that can ruin your business. These include the following:
Not Paying Attention to Small Purchases
Businesses have all types of expenses, and they need to keep a record of all their transactions. But a lot of business owners do not address and record small purchases on their books. Unfortunately, small purchases such as new file cabinets can add quickly. Thus, they should be treated as personal expenses.
Not Classifying Employees
These days, businesses have various kinds of employees who work on different projects. Independent contractors are also available to work with them. Misclassifying these contractors as freelancers can put a business in legal trouble and face tax penalties. Employees must be classified accordingly, and as a business owner, you must consult with a bookkeeper who can inform you about employee classification.
Failing to Reconcile
The account books of a company must be reconciled to the recent bank statement. You need to make sure this is done every month to determine your company’s financial health. Regular reconciliation lets you determine the amount of money you have on hand and discover errors the bank may have made before they can become significant issues that can ruin your financial plans.
Failing to Have Proper Backup
These days, business owners can tap into the cloud infrastructure to go paperless and stay connected with their business wherever they are in the world. They can access business data every time of the day and night. But going fully paperless can result in some issues. For beginners, technical glitches happen frequently, and business owners may lose their records when this happens. Also, tax authorities may prefer a paper audit of your transactions. Thus, it remains important to keep a paper backup of your business data.