When it comes to running a successful business, accurate bookkeeping is vital. Many small business owners will opt to handle the books themselves rather than hire a professional bookkeeper. However, it’s not as easy as it seems. In fact, a recent U.S. Bank study shows that approximately 82 percent of small businesses and startups fail as a direct result of poorly managed cash flow.
In this article, we will review some of the most common mistakes made by inexperienced small business bookkeepers.
1. Not Hiring a Professional
Even if your business isn’t big enough to justify hiring a full-time bookkeeper, you can consider a part-time employee or, even better, outsourcing your bookkeeping services to a professional accounting service provider like Ferguson, Timar & Company. It can be an affordable solution to your bookkeeping problem.
2. Lack of Organization
If you are insistent on handling the books yourself, then organization is vital. You need to be disciplined and attentive to the details. Otherwise, it can be easy for your books to get off-track and issues to arrise.
3. Booking Expenses to the Wrong Place
This is one of the most common mistakes and is usually a result of people not accounting for their cash sales properly or failing to keep up with the balance sheet. Another issue is making everything an expense rather than categorizing as assets or liabilities, which can really damage your cash flow management.
4. Not Considering Both Principal and Interest in Loan Payments
Whenever you make a business loan or credit card payment, it will include some principal and some interest. The experts agree you should only be expensing the interest portion of the payment. The principal payment is actually reducing the amount you owe, so it technically shouldn’t be considered an expense.
5. Overlooking the Small Details
Let’s face it: Small oversights and careless bookkeeping habits eventually evolve into big accounting problems. If you are going to do your books yourself, you have to dot every “i” and cross every “t.” If not, your business could suffer as a result.
Business owners who choose to do their own bookkeeping are statistically more likely to fail unless they have a strong accounting background. Outsourcing your bookkeeping services to Ferguson, Timar & Company is an affordable way to have a team of professional CPAs working with your company’s best interests in mind. It will save you time that you can focus on other important business-building efforts. It will even save you money over time, as your taxes will be prepared properly and your books will be accurate. This improves cash management and makes for a healthier business.
To learn more about small business bookkeeping and tax preparation services from Ferguson, Timar & Company, contact us today.