5 Biggest Bookkeeping Mistakes & Tips to Avoid Them

  1. One Bank Account – having only one account in a business is to a business owner like having only one room in a house.  All your furniture, kitchen, bathroom, bedroom all in one room.  It may be a lovely room, big enough to hold it all.  But it is still just one room.  There are reasons we devise furniture and rooms for different functions; we have different needs at different times.   So does your business.
  1. Keeping Your Books In Excel – do you ride a bike everywhere?  You could.  You could take back roads all the way from New York to Los Angeles on a bicycle.  You’d have strong legs and probably poor hygiene, perhaps pneumonia.  And not a lot of time for anything else.  The bookkeeping platforms are the cars, plain and simple.  Faster, more efficient and certainly a smarter way to travel.
  1. Not Reconciling Your Accounts Monthly – do you change the oil in your car routinely?  Most cars are fairly forgiving in this regard, and you can last a while without giving it this little kiss of TLC for a time and she’ll still run for you.  Perhaps not as efficiently, and eventually, she will stop working.  This is what happens when you don’t reconcile monthly.  You may get lucky and get away without this for a time, but eventually it just stops working.  That’s your business, not your car – your business stops working.
  1. Not Forecasting – only looking at the past, and maybe the present is not enough.  It’s the future that can take down your business.  Even looking forward only a week or two can help you navigate upcoming expenses, but in reality it should be a month or more.  Know what expenses you have coming and know what money you have outstanding and when it may arrive.  This is all fairly simple, yet can be robust and supported by previous data if tracked correctly.
  1. Poor Record Keeping – receipts, bills, invoices, all of it should be kept and properly organized.  Tedious though it may be, the paper copies are required if there is ever an audit.  Originals are the gold that will save your business in an audit.  Have backups, scan them, make copies of checks or original documents that you sign.  Backup your business books and any other data in your business.  Keep at least three years, five is better.

Building a client’s banking is usually the first step, then getting the preliminary forecast constructed.  Next, reviewing the Chart of Accounts in the bookkeeping software to ensure that all reimbursable and deductions are captured, then looking at receivables followed by payables.  Reconcile every previous month’s account, including the Paypal, Stripe or Venmo accounts you may have.  Actually reading the financial statements and tracking trends in certain parameters will allow insights that may save your business some significant setbacks.

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