Common business finance mistakes

There are several common business finance mistakes that can make a significant impact on your business, if you are not aware of them. Savvy business owners are aware of these mistakes and set systems in place, that help keep them from happening. It is important to understand that for every size of business, bookkeeping is a significant part of any business endeavor. It is undeniable that while it is typically not one of the more glamorous jobs, bookkeeping is at the heart of a company's success, and errors can cost any the company significantly. Here are some common business finance mistakes and how to avoid them-

• Not having a bookkeeper-Trying to do it yourself is also one of the most common mistakes made by small business owners.Too many small business owners insist upon handling the books themselves. It is crucial to understand that having a competent bookkeeper who can come in to handle the books, can be extremely beneficial.This is because they have the skills to do the job quickly and efficiently, and will provide a second pair of eyes to find errors and make suggestions. Once you get a bookkeeper in, you need to realize that having someone handling bookkeeping is only effective, if they are filled in and kept up to date, on all financial transactions. Whether you are paying a bonus or buying supplies, you need to keep your bookkeeper in the loop.
• Not saving receipts that are less than $75 dollars. While such receipts may not be required by the IRS, you need to realize that they provide backup documentation for the many deductions you may claim. The simple solution to this is to have a folder for such receipts, which can prove valuable at tax time. Another part of this problem is forgetting to track reimbursable expenses. Small business owners often pay for expenses, out of pocket or with their own personal credit card, then make the mistakes of failing to track these expenses. They then fail to submit the expenses to the company for reimbursement, and as the result of this don't have a complete picture of their business' finances. If you purchase something, for your business, no matter how small you should report it.
• Not properly classifying employees-This is especially important if your business uses independent contractors, consultants, and freelancers. It can be difficult to determine who is on staff and who is not. It is important to realize that this results in misfiling, when it comes to filing taxes, since there are different rules and regulations for employees and non-employees.
• Not reconciling the books with the bank statement each month. One of the fundamental aspects of bookkeeping is reconciling the books and bank statements every month. Nonetheless, there are businesses that do not do this and others where errors are made by not doing it properly. Again, this is a good reason for hiring an experienced bookkeeper.
• Not having backup-It is crucial to realize that the paperless office does not exist in the real world, where audits do still exist. A paper trail, documentation or verification in the form of backup documents should always be available. This is especially true if all files are on a computer system, which could be prone to technical problems.
• Not using the right categories-It is important to keep in mind that there are fairly standard categories for expenses. However, many times expenses are entered into the wrong, or too many categories are created. It is important to make sure to use general bookkeeping guidelines, for standard categorization and create as few new categories as possible. You should always try to follow generally accepted accounting practices.