Last week, I provided you the first 5 of the top 10 bookkeeping mistakes I see time and time again with small, creative business owners. Catch up on those here, and take a peek at the remaining 5 below! Are you guilty of any of these? If you are, don’t worry! It’s never too late to improve your practices & you can always reach out so we can help.
6. Paying for business expenses with personal funds and not reimbursing yourself
This one is similar to the mileage. You need to reimburse yourself for any items that you purchase with personal funds because those items are eligible expenses on your taxes. Keep a spreadsheet or some other tracker that you can enter these transactions in and reimburse yourself once a month if possible. Be sure to categorize the money you pay yourself so that it matches the type of expenses you incurred.
7. Not tracking and remitting sales tax
Defaulting on taxes is something you want to avoid at all cost (literally) because the penalties alone can be detrimental to your business. Even if you don’t owe sales tax in a given period, most states have penalties for not filing that equate to at least $50 for every month the return is not submitted. If you are collecting sales tax on products, you need to be tracking that as a liability within your bookkeeping software and remitting that money right back to the state on your scheduled due date. Contact your local Department of Revenue or Comptroller and ask them to verify what you need to charge sales tax on, how much you need to be collecting and how often you need to file reports and remit the funds to the state.
8. Not reviewing reports
If you are spending the time to keep up with your bookkeeping or you are paying a bookkeeper to do it for you, why aren’t you taking the time to review reports such as the P&L and Balance Sheet? These reports will show you if you have a profit or loss in a given period, they’ll show you the value of your business and they’ll even show you which products or services you sell are the most profitable for you. Take some time to review them so you can make informed decisions in your business.
9. Not having a business bank account
As soon as you start your business, go out and open a small business banking account. Do not just start accepting payments and paying for expenses out of your old personal bank account. This is just asking for problems. For one thing, you don’t want all of your personal transactions feeding into your bookkeeping software and if you get a little behind how are you going to remember if that Target transaction was from when you bought office supplies or when you went and bought your sister a birthday present? The IRS would ask the same. If they see a large mix of business and personal expenses in one account they’re going to get on high alert a little bit and start questioning each and every transaction.
10. Doing it yourself with no support!
You can’t do it all. Bottom line. As business owners sometimes, I think we feel like it’s our job to do “all the things” in our business. Like that’s just what business owners are supposed to do and that’s the way we are going to operate. Nothing is further from the truth. We don’t have to do it all and we aren’t all given the skills to do it all. When you make the decision to DIY your bookkeeping, make sure you’ve taken a course, joined a mastermind group, had some training sessions or have ongoing consulting from a professional and that you truly grasp the aspects of bookkeeping and why they are important to your business. If you try to go at it alone, you’re likely to get frustrated, overwhelmed and want to give up. Nip that in the bud and make the decision from day one to get some sort of support or just completely pass it off to someone else who can handle it for you.
Here’s to avoiding these common mistakes and taking control of your business finances!