When a company is concerned about its cash flow, do it yourself basic bookkeeping seems to be the easy answer to your problems but bookkeepers should be seen as an asset to the business and helping small business owners to keep afloat by monitoring their cash flow, making sure all possible tax deductions are claimed and keeping records up to date to help you manage your business. Here are four common mistakes made by DIY bookkeepers.
Lack of understanding of accounting software
A lack of understanding of basic accounting principles and complex accounting software can lead to inaccuracies in accounts which can potentially lead to penalties being imposed by the IRS for underpaying tax. A professional bookkeeper will understand the intricacies of the software and what records need to be entered into the system. This will avoid the costly process of your accountant correcting your books at year end and avoid any tax liabilities which will save you money in the long run.
Missing deadlines for payroll or sales taxes
One of the mistakes an owner can make when doing their own bookkeeping is failing to file/pay their payroll or sales taxes on time. This can lead to late penalty and interest due. Using the services of qualified bookkeepers will give you peace of mind as they will keep your records up to date and contact you when they require any additional information to file your forms on time. You remain responsible for ensuring that the necessary information is with your bookkeeper in time.
Invoicing incorrectly
One of the major mistakes a business can make is incorrect invoicing or waiting months to invoice which can put a strain on your cash flow. Incorrect invoicing can be a huge cost to a business in the time lost to try and reconcile the invoice with the product or service purchased and an unpaid bill in the process. Having a professional bookkeeping company on hand will ensure that the invoice is correct, it is issued in a timely manner and they will also chase overdue debtors, leaving you to the important task of running your business.
Incorrectly recording items as being deductible when they are not
One of the most common mistakes made when doing DIY bookkeeping is incorrectly recording items as being tax deductible such as claiming for a full tax deduction when an item is partially being used for private purposes such as a motor vehicle or meals and entertainment. A professional bookkeeper will keep up to date with the changes in tax laws pertaining to your industry and have a full understanding of what items are tax deductible for your business.
Failing to keep back up records
There is an ongoing education process for business owners in regards to knowing what records to keep, for how long and ideally recording details in an accounting software package for easy access and transfer to your accountant. However, backing up these financial records is equally as important. Your laptop may be stolen, the hard drive may fail or in the worst case scenario, your house may burn down. Back up storage should be kept offsite in case of a fire or break in. A specialist bookkeeper should have off-site storage facilities available as part of their service.
The advantages of using a professional bookkeeper will ensure your records are correct and up to date, keep a close eye on cash flow and help reduce your tax liabilities. Good bookkeeping puts you in control of your cash flow and you can use the updated reports to make important business decisions and forecast the future plans of the business which will offset the cost of the bookkeeping service.
Written by Bookkeeping Pros of Syndey, Australia