In an earlier blog we talked about the usual traps small and medium businesses fell into with their book-keeping when they were sloppy and unmethodical. In this blog, we talk about typical mistakes owners make with the book-keeping itself.
- Not tracking reimbursable expenses
With small enterprises, personal and business expenses have a high tendency of flowing one into the other. When you pay using your personal cash or credit card, don’t forget to make note of it, and have it reimbursed to yourself.
- Not classifying employees properly
To you they may all seem the same – employed staff, consultants, independent contractors, and freelancers. But the government sees them as employees and non-employees and has different rules for each of them come tax-filing season.
- Not doing monthly book and bank statements reconciliations
If you can’t do it yourself, hire someone to do it for you or outsource it. This is a monthly task and can’t be ignored or left to the end of the year as it can generate errors.
- Not maintaining adequate back-up of data
As long as there are audits, maintain back-ups in the form of paper-trails as well as online. Cloud based accounting is excellent, efficient and practical. However, should there be any kind of technical problem or hack, you don’t want all your eggs to have been in one basket.
- Not deducting sales tax
Your total sales will be a lot higher and, therefore, more pleasing to look at before you have deducted the sales tax. However, the amount that looks at you after deducting this sales tax is reality. The latter shows the actual amount after misusing due taxes which you will be paying.
- Petty cash carelessness
This small bit of handy cash is usually not accounted for seriously. But it is a significant amount of money that you absolutely need and use on a daily base, and therefore you ought to be maintaining a record for it. A petty cash slip should be filled out each time someone takes the money, and it can be re-filled after all the money is gone. The total amount on cash slips must equal the initial amount set aside as petty cash
- Discarding receipts less than $75
This may not account for the taxes you owe, they still form an important part of your paper-trail, and may even be necessary as part of the documentation for to claim deductions under a certain category. Simply file them in a separate folder till required.