Many new businesses spring into life with a flurry of enthusiasm and energy. Aspirational entrepreneurs dive into marketing, manufacturing, and selling with a focus on pitching to new clients, generating product interest, and creating sales. Unfortunately, this early eagerness can be the wave that washes other important considerations like accounts and bookkeeping to the back of your mind.
Most of the time, the less glamorous aspects of running a business, like bookkeeping, get pushed to the back of the queue for things to do, which means that business owners end up chasing their tails in a never-ending game of catch-up just so that they can stay on top of the finances. However, the truth is that accurate and timely bookkeeping isn’t just an important aspect of properly maintaining your tax returns, it’s also crucial for proper business management.
If you’ve convinced yourself that you can get by without a bookkeeper, the chances are that you’re about to (or already have), fallen victim to the following 3 most common mistakes.
Mistake 1: Failing to Keep Business and Personal Accounts Separate
When you’re not used to running a business, it’s easy to forget that your company account, and your personal account are two separate entities. You might even decide to use your personal bank account for business purposes in an attempt to cut out excess paperwork and ignore unwanted taxes. Unfortunately, this time-saving practice can be a recipe for disaster – particularly if your business ends up being successful.
Part of running a business properly means ensuring that you can claim for every legitimate business expense, while ignoring items of personal expenditure. Keeping things simple and clean from the outset by separating your accounts can help you to avoid tax problems and confusion later on.
Mistake 2: Allowing a Backlog to Build Up
As you push past the initial chaos of starting a business and your company takes on a momentum of its own, you’ll probably spend the majority of your time and energy ensuring that everything keeps ticking along as smoothly as possible. This generally means putting off additional tasks like bookkeeping, as you tell yourself that you can get it done another day.
Unfortunately, trying to catch up with a bookkeeping backlog is a very stressful and difficult process. The best thing you can do is get your system set up well before the business even opens its doors, then delegate the task to a professional bookkeeper so you can take some of the pressure off when getting your company underway. It may seem like just another additional expense, but it’s important to remember that running a business is no easy feat – and you won’t be able to accomplish everything alone.
Mistake 3: Making Math Mistakes
Finally, when you’re in a rush to finish the books after a long day of chasing after customers and completing orders, it only makes sense that your mind’s going to be focused on other things. Unfortunately, this generally means that you maximize your chances of making a math mistake that gets swept under the rug until it’s much too late for you to fix it. Remember mistakes happen often, and easily- regardless of whether you’re using solutions for automated accounting.
Combine constant inaccuracies in your records with a backlog in your files and you could have a recipe for financial disaster as one mistake piles on top of another to create a complete mess of your official documentation.
Change Your Mind about Bookkeeping
A lot of small business owners consider bookkeeping to be one of those annoying tasks that has to be done for the sake of saving a few extra pennies here and there. However, the truth is that bookkeeping shouldn’t just be an irritating chore – it should be recognized for what it is – a function at the very heart of your business.
Without proper financial records, your business wouldn’t be able to thrive. Not only would you find yourself in trouble with the taxman more often than you’d like, but you would also miss out on important data that could help your company to become more effective and efficient.
While there are plenty of ways you can simplify and automate your bookkeeping system to make the process less demanding, the best way to manage your finances is to have someone else take on the hard work for you. After all, that’s what professional bookkeepers are for.