Bookkeeping Mistakes by Small Businesses Peoria IL

Keeping accurate records for your business is a crucial task. But, many business owners fail to take the necessary steps to ensure that this task is completed properly. Bookkeeping is essential for ongoing record keeping, legal protection and accurate tax filing. By understanding what the most common bookkeeping mistakes are, your small business can work to avoid them.

Here are the 10 most common small business bookkeeping mistakes:

1. Poor Receipt Record Keeping Many businesses keep accurate records for larger receipts, but fail to keep accurate records of small expenses under $75. Part of the reason for this is that it is easy to lose receipts or to consider a small expense as insignificant. Maintaining accurate records can not only save you money on your income taxes, but can provide the much needed documentation in the event of a business audit.

2. Lack of Professional Help Many small business owners fail to recognize the importance of hiring a professional to manage the task of bookkeeping. A bookkeeper will not only know what to record and how, but they are kept abreast of legal changes that you may not be familiar with on an ongoing basis, many of which can save your business capital.

3. Poor Tracking Many business owners pay for expenses out of their own personal funds. For example, they may use their personal credit cards or cash accounts to pay for business expenses. And, they often do not keep accurate records of these expenses. It is important to keep accurate records of any and all expenses and whether or not they were reimbursed.

4. Improper Employee Classification Many businesses have a combination of independent contractors and employees. Business must properly classify their employees for tax purposes and must keep these designations separated.

5. Poor Communication Strong communication between employees and bookkeepers is essential as this will work to avoid reporting and other financial mistakes. It is advised to schedule regular conference calls and meetings to ensure that mistakes are minimized.

6. Lack of Financial Reconciliation It is vital that businesses reconcile their financial records at least on a monthly basis. Errors are more likely to be made if this task is not completed on a timely basis.

7. Lack of Record Back Up Even though we live in a technological age, issues can arise. It is important for every business to back up their data to avoid crucial losses.

8. Poor Sales Tax Reporting This may not affect every business, but not reporting sales tax and not accurately accounting for sales tax is a common bookkeeping error.

9. Poor Petty Cash Management Many businesses operate with a small amount of petty cash, but many lack proper accounting systems to track it. Be sure to set up a system to track the cash kept on hand in the business and what it is used for.

10. Improper Expense Categorization For proper tax reporting, business expenses should be properly categorized. Formal bookkeeping practices can be used to help reduce the likelihood of improper categorization.

Salim Omar, author of Straight Talk About Small Business Success In New Jersey specializes in providing accounting and tax services to small business owners and professional practices in NJ. Salim's articles are featured in various national magazines including Accounting Today, The CPA Journal, Chiropractic Economics, Wealth Manager and The Two River Times. You may request a free copy of Salim's new special report titled "How To Drastically Reduce Your Taxes By As Much As 62% This Year Alone And Put Thousands Back In Your Pocket" at http://www.OmarGroupCPA.com

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