Bookkeeping is an integral aspect of accounting, and it is very common bookkeeping mistakes in particularly for smaller and medium-sized businesses which can’t invest in the time and effort required to keep their books in order. How can you improve the efficiency of your bookkeeping and minimize the possibility of errors in bookkeeping? Simple, you’ve seen them prior to the time.
As a top remote-based accounting firm specializing in outsourcing bookkeeping services, We have come across and fixed all kinds of errors that can erode the accounting foundations of the company.
With inputs from our bookkeeping experts at Outsourced Bookkeeping, we will go over the various issues in the blog we are writing today. First, we’ll start by looking at the root of the increasing frequency of bookkeeping errors and then look into the most common mistakes made in bookkeeping by companies. Learn more about:
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Why bookkeeping is error-prone?
The process of bookkeeping can be very tedious, mainly when a company utilizes manual or conventional methods for keeping an accurate and complete accounting of transactions in the financial sector. A lack of knowledge, time, and consistency are three elements that can lead to mistakes and inefficient bookkeeping. Here’s how:
Timing: Time is paramount in the bookkeeping process. Small and medium-sized companies which have resources that are constantly juggling tasks may not have enough time to concentrate on the monotonous nature of bookkeeping.
Insufficient knowledge and resources It could be because of insufficient capital or lack of access to appropriate bookkeeping resources, both of which could hinder the bookkeeping process, which is the foundation of any accounting procedure.
Conformity Bookkeeping calls for consistently clean books, especially if an organization strives to have a seamless and precise accounting. Unfortunately, a majority of businesses suffer from a lack of resources, and time has poor consistency. If you’re facing one or both of these issues, you might want to consider outsourcing bookkeeping services that provide seamless and consistent bookkeeping services.
Lack of consistency, time, or experience can lead to the development of an inaccurate bookkeeping process. What are the most common errors in bookkeeping? Learn more about them:
6 Common Bookkeeping Mistakes Businesses Can Avoid:
Errors in the categorization of expenses:
This is the most fundamental and frequent common bookkeeping mistakes we encounter in start-ups. Because of the importance of the process of categorizing and tracking these expenditures and income is in the calculation of profitability and finding new tax-saving possibilities, bookkeepers need to be attentive to the categorization.
Blending business and personal expenses:
Mixing business and personal expenses is the easiest way to further complicate the maze of bookkeeping. And this happens to be the most common mistake made by small and medium businesses which not only complicate bookkeeping but also create potential auditing problems in the future. So our bookkeeping experts at Outsourced Bookkeeping advise maintaining a dedicated bank account, credit card, and cash at hand for all the purposes to avoid the hassle in the first place.
Not keeping track of receipts and petty cash:
Receipts for small amounts are crucial when it comes to claiming expenses or tax deductions. It may seem like nit-picking but having them at hand is both a time and money saver when the time arises. So bookkeepers are advised to maintain a folder that can store these simple receipts. There are even tools and third-party integration that can further simplify the task by taking a snap and storing them digitally.
Similarly, the business also neglects petty cash that goes in and out of the business which in the long run can end up making a big hole in the pocket. Our bookkeepers at Outsourced Bookkeeping advise a dedicated custodian for managing this cash and purchases made through cash. Ensure receipts for these transactions and clear documentation for the same, to further simplify this process.
Not maintaining backups:
While technology is helpful in automatizing repetitive tasks, enterprises in rare instances could encounter problems as well. The data that is stored digitally could face operational issues which can lead to data loss, primarily because of system malfunctions. If an enterprise does not have backups, it could lead to chaos for accounting teams as well as imminent IRS issues. Sometimes, simple steps can protect us from a catastrophe, and having the correct cloud backup is among the ways to do this.
Neglecting sales tax deduction:
The most frequent error that retail businesses make is the non-reporting or accounting for sales taxes. This could lead to incorrect measurement of the performance of the business or the levy of fines. The biggest issue for businesses is that they do not have an appropriate CPA in charge to educate and explain the obligations associated with sales tax which we’ll discuss in the following section.
Not hiring expert bookkeepers or CPAs:
A bookkeeper who is an expert will simplify the process, however, if you’re determined to grow your business following the outbreak, finding the right CPA is essential. An experienced CPA will help you understand the tax obligations for sales that they collect and file sales tax on your behalf (refer to the above paragraph) Finds tax-saving opportunities, assist you through an audit, and offer an expert guide to accounting and finance to support the expansion of your business.
But, due to a lack of capital, or lack of access to funds, many businesses aren’t able to fully benefit from an experienced CPA and outsourcing could fix this. Being one of the most reputable accounting firms in the industry, Fin-eX has a proven track record of providing expert bookkeeping services. It is staffed with experienced CPAs as well as Bookkeeping experts Fin-eX will help you increase your business’s performance with our comprehensive bookkeeping and accounting services. You can contact us here: https://finexoutsourcing.com/