As a small business owner, the administrative side of running a business can be a full-time job in and of itself. Maintaining everyday financial demands is often filled with hiccups and pitfalls that can leave your team scrambling for solutions. Bookkeeping is one such duty that can gobble up the precious production time of multiple staffers when problems arise.
What can you do to avoid these occurrences? Often it’s just a matter of having the right processes in place. To help you get a jump start on heading off bookkeeping issues when they pop up, we’ve put together the four most common mistakes made when balancing your finances and what to do about them.
1. Data Entry Errors
Even with the advanced automation tools built into most bookkeeping and entity management software, human error still persists when inputting data. These mistakes could cost a company thousands or more in fixes, possibly even more if business decisions were made on such bad information.
Create a bookkeeping system that is proactive and not reactive. By actively identifying areas in your processes that increase the risk for data entry errors, you can shore up your current methodologies and develop a management plan that ensures compliance.
2. Using Faulty Bookkeeping Practices
Most small business owners aren’t accountants, so when it comes to balancing the books, things can be disjointed or lack essential bookkeeping processes altogether. Nevertheless, your financial records need to be in proper order for many reasons, including those to do with regulatory, tax, and liability issues.
Transactions that aren’t accurately documented or not at all can cost your company everything if a tax audit or customer dispute arises. These are just a few of many risks that threaten the long-term success of your business, so having proper documentation is essential.
Below are some of the more common records your organization needs to track:
- Cash flow
- Tax Record
Whether you store this data in the cloud or use a traditional filing system, without it, you’ll likely have major financial headaches in the future. If you aren’t sure what information you need to include within this documentation, be sure to consult with a knowledgeable bookkeeper.
3. Wearing Too Many Hats Costs You Time and Money
Many small business owners want to be present in every aspect of their operations. This is perfectly understandable, but handling bookkeeping, training, sales, operations, and more can actually cost you more.
We all know that time is money, but when it comes to accounting, you may find yourself stretched thin. It’s easier to make critical mistakes when you’re involved in every process of running your business. However, your time is valuable, and it may be wiser to delegate management of your finances to professional bookkeeping services. They have the necessary training to handle your accounts correctly and the time to dedicate themselves fully to your financial matters.
4. Cash Flow Errors
Cash flow measures how much money flows in and out of your business. As an owner, this projection is crucial for making important decisions about the direction you want to take your company. But unfortunately, cash flow forecasts are often quite different from your actual financial numbers, which can spell big trouble.
Luckily, diligence and knowing what discrepancies to look for can help you keep a clear picture of where your company’s cash flow is for the month or quarter. When you see significant differences pop up between forecasted and actual numbers, you can use this information to look further ahead and plan how to stay on track.
Most businesses won’t conduct cash flow projections beyond a year in advance since many unknown factors could arise and impact estimations. However, from new competitors entering your marketing to an economic downturn, being accurate about your cash flow is essential to future growth and success.
Bookkeeping Doesn’t Have to Be a Dreadful Chore
If you have realized your days are spent navigating financial issues more than growth, consider working with a professional bookkeeper. These professionals have the industry knowledge and training you don’t and can make a tedious task fraught with frustration into a seamless process. Then, imagine the time you can get back to spend on more important matters, such as onboarding new team members, acquiring an additional business, and other business goals you have planned.
The time savings aren’t the only appeal of relying on a bookkeeper. When it comes to costly mistakes, their knowledge will ensure you avoid the pitfalls that can cost your company thousands in lost revenue, tax audits, and related penalties. Knowing your finances are balanced and accurate is a peace of mind well worth its investment. So say goodbye to thousands of lost production time because of avoidable bookkeeping errors and let the professionals handle it for you.