As a small business owner, it is important to be accurate in keeping your books. This includes tracking your income and expenses, to come to a net profit or loss for your business each year. Yet for many small businesses, the choice not to work with a professional bookkeeper or accountant can mean they are making mistakes that are costing them money. Working with a tax professional or accountant, such as Tax Problem Resolutions, Inc in LONGWOOD, FL, you can avoid these 5 accounting mistakes with your own books.
No matter how small your business, you need to formalize your bookkeeping and accounting procedures, as well as other business tasks. The reason is that even freelancers and self-employed individuals will need to pay taxes and report earnings. By having your accounting procedures defined, you will make it easier to comply with these requirements quarterly and annually. Keep a copy of all executed contracts, certificates for insurance and other paper backup.
You should also document how to set up a new vendor. If you will have employees doing the collecting of this information, you will need to create a checklist or other standardized form to be sure that all the information is collected correctly.
A budget is a necessary part of any business. It provides a baseline for judging how well your business is operating. With a budget, you can use it to curb overspending in various areas, but also establish realistic objectives for your finances over the life of your business. However, it is important to be realistic with your budget. At the same time, it can be a great way to set goals about increasing your revenues or to set the goal of reducing various operating expenses. Without a budget, none of these goals would be possible. If you are having trouble setting up a budget, use your last quarter’s expenses and then annualize them to get a baseline. You can always tweak your budget if your year shows you under or overestimated specific budget areas.
It is possible to make data entry errors. While not all of them can be prevented, it is important to put reconciliation policies in place so the errors can be caught early and corrected. Monthly bank reconciliations are a great way to accomplish this, along with reconciling your accounts receivable and accounts payable. Budget to actual variances can also identify errors in your classifications of expenses. Various reports can be put into place to check your income entry as well.
The most important thing to remember is that reconciliations are necessary to keep your books on track. Also, you will want to be sure to review any unusual transactions to be sure there have been no errors in their entry. Using the local professionals can assist you in spotting any potential errors that might have crept in.
This falls in line with data entry errors, because a wrong classification can mean less of a deduction later. By keeping up with your bookkeeping or using a local professional, you can make sure that everything is categorized properly when it happens, instead of relying on your memory at a much later time. This will also mean that you will find that preparation for tax time will also be easier, versus a mad scramble right before your return is due to the IRS. For those with just a few transactions a year, this will be easier to accomplish, but most small businesses require more effort to keep everything categorized properly. Therefore, it might be worth considering outsourcing your bookkeeping to be sure that you are categorizing your expenses properly.
While it is admirable to want to save your business money by accomplishing tasks on your own, the job of accounting might not be one of those areas. If it is done incorrectly, accounting errors can end up costing your business fines and penalties. Thus, it is worth consider using an accounting professional to complete various accounting tasks.
In the final analysis, accounting is a necessary task for any business, but there are plenty of opportunities for errors. Therefore, it is important to consider outsourcing this task to a professional who can assist you in eliminating as many of these errors as possible.
Click on the link below to contact a tax professional or accountant at Tax Problem Resolutions, Inc in LONGWOOD, FL, for bookkeeping assistance to avoid these errors!
