Whatever your business, whatever market you operate in, whether you have a handful of staff or a hundred, bookkeeping is essential for both legal operation and your business’ fiscal well-being. Despite this, bookkeeping is often an afterthought for SMEs, especially startups, which can lead to further problems. Mistakes in bookkeeping can obscure problems or even cause them, threatening the future of the emerging business. It doesn’t have to be that way though. Here are the top 5 mistakes that are made by businesses and entrepreneurs today, and how you can avoid them.
1. Not Hiring a Bookkeeping Service
For many SMEs, the temptation to control costs by avoiding hiring a professional bookkeeper can seem rational on the surface. Business owners often convince themselves that this is something they can do in addition to their daily responsibilities without additional cost to the business. This often leads business owners to waste precious time spent on bookkeeping instead of growing their business.
Hiring a bookkeeper, whether internal or external, can help save time and money in the long run, while keeping their finances consistently in good order.
2. Not Maintaining Separation of Business and Personal Expenditure
This is a problem most commonly found in startups, especially small ones. Entrepreneurs who sink everything they have into the business are taking huge risks, often including their own savings. It can be tempting to put the two together out of convenience, but this can lead to confusion (and lawsuits) when it comes time to pay taxes.
If you have any doubts about fund allocation, get in touch with your professional bookkeeper and they can provide key advice on avoiding this situation.
3. Keeping Track of Reimbursable Expenses
Failing to track reimbursable expenses costs money, and in some cases can prevent tax deductions too, which costs even more money in the long term. This is one of those ‘I’ll do it at the weekend’ type jobs that is too easy to keep putting off. The problem is, and any professional bookkeeper will tell you this, the longer you leave it without tracking those expenses, the greater the chance they will just get overlooked.
There are ways to speed this up, with a range tools to help. In particular, expense tracking apps can help you do this as they are accrued. There are several to choose from, talk to your bookkeeping service to see which they like. With an outsourced bookkeeping service that leverages on technology, they can combine their human expertise to provide the best of automation as well as helping you making sense of the numbers. This is important if you are ever audited, you want to have everything up-to-date and recorded.
4. GST or VAT
Even just a few years ago, sales taxes were relatively straightforward, however with online sales now a significant part of retail activity, including sales to individuals and companies all around the world, things are more complex. Knowing when sales taxes of any kind apply, which customers are exempt and so on needs careful management, and as such, this is an area where mistakes are common.
Failing to apply sales tax to appropriate sales is the obvious issue, but with so many scenarios in online sales, there are several situations where a business can get into trouble with sales tax. If you are outsourcing bookkeeping, then seek advice from your bookkeeping service to ensure your systems are set correctly. Many online stores provide all the tools needed to adjust sales tax on the fly to suit each customer based on purchase and location.
As mentioned earlier, outsourcing bookkeeping provides many benefits for any business, delivering accuracy and value that ensure the business operates in compliance with legislation at all times and can save money too. However, to maintain that professional performance communication is essential. If supplies are purchased for the business the receipt must also logged so that transaction can appear correctly in the accounts. Similarly, if someone is paid a bonus, if a freelancer is hired to take on a specific task, ensure the expenditure is registered for what it is.
Freelancing especially has become extremely common today, and they may not be based in the same country as the business, for instance hiring a designer to create a website. It is crucial that the professional bookkeeper knows what the expenditure is for when payments are made. The bookkeeping service can deliver exceptional value and performance, but businesses must provide them with accurate, up to date information to do so.
With a startup or growing business, there are many mistakes made in every aspect of the organization, and in that respect, bookkeeping is no different. However, by outsourcing bookkeeping SMEs can gain professional skills without heavy investment in training, and enjoy insight and guidance to avoid many of the bookkeeping pitfalls they would otherwise encounter.
With that in mind, outsourcing bookkeeping is one of the best ways to prevent mistakes and will ensure that one crucial area of business is taken care of, reducing stress for owners and allowing them to focus on essential business processes instead.
To prevent these frequent overlooked mistakes, give Binery a try for free for 30 days! We are a modern bookkeeping service that leverages on technology and human expertise to fully support your business growth.