Bookkeeping – Let’s not bury the lede here: bookkeeping and accounting are a pain. Irrespective of the business size, bookkeeping and accounting hold immense importance in every business. The bookkeeping process needs to be dealt with effectively throughout the year.
Start-ups and small businesses face many accounting challenges because of a lack of adequate resources, especially when it comes to bookkeeping. But, luckily for you, it doesn’t have to be! Keep reading to learn about ten of the most common bookkeeping issues and how you can solve them.
1. DIY Approach:
This has to top the list of bookkeeping issues. Many small businesses and start-ups make the mistake of doing their own books, even when they are unqualified and do not understand accounting. Many have this notion as many accounting software makes it easy for an individual without accounting knowledge to conduct the accounting process of their software efficiently. However, when this software is misused, it could lead to inaccurate tax returns and filing costs, even more time and money.
2. Bookkeeping – Lacks Basic Accounting Knowledge:
Some of the most common accounting mistakes made by small business owners don’t know how to record purchases, not understanding the difference between cash and accrual accounting, and not tracking their income. If a business owner has a complex time understanding how to count, balance, and reconcile the books, they’re going to have a tough time getting their company up and running. Small business owners need to be able to identify any internal errors quickly and without fear.
3. Mixing Personal Finances With Their Business Account:
Maintaining separate accounts is one of the most common bookkeeping issues that small businesses face. If you combine your personal finances with those of your business, you cannot correctly estimate the profit generated by your invested capital. Also, this can be a major reason for the issue in tax returns and why you can not avail of tax concessions.
4. Not Knowing of Tax Concessions:
Keeping up with tax paperwork is one of the most time-consuming aspects of running a small business, but those who neglect to take advantage of their concessions can end up paying more than they need to. Not knowing about tax concessions and rebates means you lose out on any cost-saving opportunities.
5. Bookkeeping – Unclear Account Classification:
Small business owner has difficulty classifying their accounts due to their lack of understanding of accounting basics. Accounts are classified in many different ways. Proper classification of accounts is one of the most important aspects of bookkeeping because it helps maintain balance sheets, profit and loss statements, and cash flow forecasts. The proper classification of accounts is also necessary for maintaining accurate financial records.
6. Maintenance of Financial Records – Bookkeeping:
You should have a system for your records- taking the time to set up a system will help you stay organized. You want to be able to find what you’re looking for quickly and easily. When organizing your records, you want to keep them short and sweet, with just enough details about where and when the expenses or income was incurred. However, this activity requires time and effort, and thus, many business owners lack behind in this task.
7. Lack of Proper Account Reconciliation:
Not reconciling your accounts can lead to many issues, including errors, mistakes, discrepancies, and fraud. Reconciling your accounts is pretty straightforward but a time-consuming and consistent task.
8. Untimely Reporting:
Timeliness is of the essence in bookkeeping. Your accountant’s data rely on your data to formulate their numbers and vice versa. Unless you do a thorough job in ensuring that all of your reports are accurate, your accountant will have a difficult time getting the information he needs to complete the task at hand.
9. Not Using Accounting Software or Cloud Technology – Bookkeeping:
Some small businesses use a simple spreadsheet to track their transactions, and spreadsheets can be a great tool for a business with simplicity in mind. However, when a company grows and becomes more complex, it may need to use an accounting software package or if the software is not available, it could store data in the cloud.
10. Bookkeeping – Poor Interpretation of Accounting Information:
You might have had a proper understanding of the financial figures as a business owner, which could lead to a poor interpretation of your accounting data. This further can lead to inaccurate financial decisions.
Solution: Get Outsourced Bookkeeping Services:
It’s easy to get intimidated by complex bookkeeping tasks. More often than not, small business owners are not trained or educated in accounting. This can result in inefficient bookkeeping services, which leads to poor management decisions. Fortunately, can take these tasks off your hands and give you time to focus on what really matters for your company, like sales, marketing, and customer service. Using a bookkeeping service is optimal for small business owners who need assistance with their finances. The bookkeeping service provider is equipped with the right knowledge and expertise to handle business bookkeeping flawlessly so that you no longer have to worry about bookkeeping issues.