Small business owners are often overwhelmed with the task of bookkeeping. The responsibility of tracking income and expenses and ensuring that all financial records are accurate can be daunting. However, making mistakes in your bookkeeping can have severe consequences for your business. So, let Edgewater CPA Group help you avoid these five common mistakes that small business owners make in their bookkeeping.
1. Not Including Bookkeeping in Your Business Plan
One of the most common mistakes that small business owners make in their bookkeeping is not including it in their business plan. Yet, bookkeeping is essential for any business, large or small. It is the process of recording and tracking your income and expenses. By keeping accurate records, you can ensure that your business finances are in order, and you can make better decisions about where to allocate your resources.
2. Failing to Stay Organized
You’d be surprised how many companies struggle with financial organization. They either fail to keep receipts for expenses or don’t keep monthly records of cash flow. This is not recommended business practice and is one of the worst bookkeeping mistakes. If financial organization isn’t your forte, it might be time to hire an outside accounting firm.
3. Mixing Business and Personal Accounts
Whether you’re a single-member LLC or a corporation, keeping your banking accounts separate from any personal assets or cash flows is always best. Mixing cash accounts can make things messy should you ever be audited. It can also create a higher risk of fraud; something highly frowned upon by the IRS.
4. Misusing Petty Cash
Small businesses may often find themselves in a bind when using petty cash. On one hand, it can be a great way to make small, everyday purchases without having to go through the hassle of tracking and recording every expense. But on the other hand, misuse of petty cash can lead to serious financial trouble. It’s just best to have a strict policy for petty cash and use it wisely.
5. Failing to Account for Sales Tax
When it comes to bookkeeping, one of the most important considerations is sales tax. This means you must track the sales tax you’ve collected from customers and remit it to the appropriate government agencies. Failing to do this can lead to big fines and penalties. So, it’s essential that you make sure sales tax is accounted for in your bookkeeping records.
It’s Time to Hire a Team
When it comes to bookkeeping for your business, it’s best to hire a team of professionals to handle all the financials for you. Here at Edgewater CPA Group, we proudly serve businesses throughout Carmel, IN. We assist with all things business, including growth strategies, tax resolutions, and payroll. So, give us a call today at (317) 386-7021.