As a practice, bookkeeping is thousands of years old. That’s not because we evolved perfect natural ways to organize our affairs, though. There are a lot of tendencies humans have to overcome for things to work out right and allow prosperity. That’s why certain bookkeeping problems are so prevalent. They’re not impossible to surmount, though!
Big Problem 1: Forgetting the Importance of Receipts
Most of us throw away our receipts from the coffee shop right after we get them. In our personal lives, we don’t have as much of a need to hold on to our receipts. For a business, though, this can be a very costly habit.
Businesses have to hold on to receipts in case of audits and other unpleasant surprises. You can use the receipts to justify useful tax deductions that save large amounts of money. The trouble is that you need to have the proof!
The first thing to do is to keep a physical file for all the receipts you get relating to business purchases. This can be as simple as a folder for each month of the year, stuffed into a plastic envelope. Or you can use a typical filing cabinet. The point is to keep them safe and at least somewhat organized.
What’s better still, though, is to get into the habit of scanning every receipt with your phone. As soon as someone hands it to you, you make an instant copy. Even if you do still lose the original, you’ll have already sent that copy straight to your bookkeeper.
Big Problem 2: Mixing Business and Personal Funds
There are much bigger issues than throwing out receipts. As far as bookkeeping problems go, mixing business and personal expenses is a huge one. It can even have serious legal consequences.
Many new business owners may not be aware of the hazards of mixing business and personal funds. It becomes very difficult to track business performance according to the accounting ledgers. That’s because both your business and personal expenses would show up there.
Many kinds of private purchases are inappropriate for a business to make. If they show up, it looks very bad when it’s time to report tax deductions.
Even if you do own the business, you should treat yourself as an employee to handle personal expenses. You should never draw straight from company accounts for personal needs.
You should at least have separate bank accounts and cards for yourself and the business. You can pay yourself a regular salary that meets your personal needs. You can transfer funds when necessary. It’s important that specific personal expenses should not appear on company statements.
Big Problem 3: Neglecting Account Reconciliation
Once you do separate your accounts, it becomes even more important to track the accuracy of each one. Banks are as likely to make mistakes as any other organization run by people. They shouldn’t happen at your expense.
When the bank statements are correct, though, it’s a chance to check your own records’ accuracy. You need to make sure that all your internal bookkeeping accounts match up with each other. The longer anyone puts off this task, the more difficult it gets.
It’s important to run account reconciliations once per financial reporting period. In an ideal situation, you would do it monthly. It does take time, though, and calls for an eye for numbers and patterns. You, as the business owner, may or may not be the best person in your organization for that task. It’s good to get independent help when it comes to solving bookkeeping problems.
This is where services like what we do at SyncLedgers come in handy. We handle regular account reconciliations as a matter of course. We do all we can to make your bookkeeping easier. And when you get a receipt from a vendor, you scan it over to us, and we’ll note and file it in the appropriate accounts. Get in touch with us today to discover more ways we keep your bookkeeping simple!