Bookkeeping seems like a easy thing to do, but here are few mistakes that are pretty common when it comes to bookkeeping.
Mistake #1: Not Performing Basic Account Reconciliation
*Reconciling your business's books with your business bank and credit card statements every month is the most important function of accounting! *
- is relatively simple: Just compare your bank/credit card registers with your statement and make sure there are no discrepancies. If there are, they need to be found and understand why. Having a bookkeeper will relieve you of that time of finding these discrepancies. By reconciliating your account on a monthly, it helps ensure that accounting errors are caught and corrected quickly before they result in major financial problems. You do not want to have a stack of 4 months or more piled up on your desk waiting to get done. Keeping up on your Bookkeeping will not only help you understand if you are operating with a Profit or a Loss it will also help you understand how it will affect your Personal Taxes as well if you have the right Bookkeeper.
Mistake #2: Mixing business finances with personal finances
- Let’s face it, we all have done it. It is a lot simpler to pay for that personal item out of your business account then to transfer the money to your personal account. This is a quick and easy way to mess up your business’s finances. And the IRS frowns on it. If you keep everything separate, there are fewer chances that your expense reports would be questioned. If you are ever audited and if the IRS finds mixing funds, they could disallow your expenses and you will be looking at paying more taxes, penalties, and interest. Make sure you are keeping all your receipts, either hard copy or by using an app on your mobile device. If you do use your business account for a personal item, make sure you let your bookkeeper know so they can properly code it in your accounting register.
Mistake #3: Not Recording Cash Expenses
- Practically every Business Expenses is a write off, no matter how small or big the expenses are. But there are some people who try to stretch some expenses of what the IRS allows. Either keep all your receipts in an envelope for your bookkeeper or save them on a mobile app like Expensify. No matter if you paid cash, credit, or check. KEEP ALL RECEIPTS!!!
Mistake #4: Not Tracking your Mileage
- For tax year 2021, the IRS mileage rate is .56 cents a mileage. Which is a lot more than your fuel cost, even in these high gas price times. The IRS does not count your mileage from your house to your first stop, or your last stop to your house. But it does count everything in between. So, pull out that smartphone of yours and download a mileage app. Doesn’t matter which one, find one you like, and track your mileage. If you are ever audited, you have proof of that number, and it is not one you come up with while staring at my ceiling during your tax appointment.
If you want to know more about how to fix these and other mistakes, call or makes an appointment! https://go.thryv.com/site/pinabiz