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 like that 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 a rational one 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. However, this is a mistake for a number of reasons.
By outsourcing bookkeeping the business benefits from a trained, professional bookkeeper who has a thorough understanding of current legislation. This alone can save any business far more than the cost of the bookkeeping service when compared to a solution using someone who is untrained. In addition, and this applies to far more than bookkeeping, business owners have a tendency to undervalue their own time.
This is easily done, during most startup periods, owners have to take on a number of responsibilities by necessity, and in that situation, it is easy to forget that the most valuable task is to grow the business. Using a bookkeeping service can easily free up three hours 0or more a day, and when dedicated to the business effectively, that can earn far more than the bookkeeper costs.
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 risks certainly, but that doesn’t mean that their entire expenditure is for the business. It can be tempting to mix the two, but that just leads to problems later down the line and the need to redo the entire year’s books.
If you have any doubts about fund allocation, get in touch with your professional bookkeeper and they can direct you to avoid problems. This on-the-spot advice is another reason why a bookkeeping service provides such excellent value.
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.