From one-person entities to large multi-state brokerages, no business can escape the dreaded task of bookkeeping. While it’s definitely not one of the more glamorous parts of the job, bookkeeping is at the heart of small business success, which means errors can be crippling.
To avoid the financial headaches that come with bookkeeping mismanagement, it’s important first to be aware of the pitfalls that can ensnare you.
Here are 10 of the most common bookkeeping mistakes small business owners make when approaching their company’s finances:
1. Neglecting to save receipts under $75.
While they may not be required by the IRS, receipts under $75 provide backup documentation for many of the deductions you might claim. Although keeping them in a folder or box is still necessary in the case of an audit, most online and digital accounting programs have accompanying apps that allow you to snap a picture of your receipt and associate them with the appropriate register entry. If you’d rather keep your receipts separate, there are plenty of third-party apps to choose from, as well.
2. Failing to track reimbursable expenses.
Neglecting to track your reimbursable expenses is like flushing money down the toilet. Not only can you lose money, but you can also lose tax deductions, which is essentially the same thing. Again, there are plenty of expense-tracking apps and programs available to make this process easy and consistent. Try to get into the habit of tracking your expenses as you accrue them — the longer you go without tracking, the more likely your expenses will become overlooked. Tracking reimbursable expenses is just as important as saving your smaller receipts — one allows you to maintain a paper trail in the event of an audit; the other allows you to track the financial health of your business.