Whether you’re a one-person operation or a Fortune 500 company, bookkeeping is a significant part of your business.

It may not one of the more glamorous jobs, but bookkeeping is part and parcel of a company’s success. Mistakes and inefficiencies can cost a company both time and money.

Outlined below are 10 of the most common mistakes made by small businesses.

1. Not saving receipts of less than $75.They may not be required by the IRS, but they provide backup documentation for many of the deductions you may claim. Make yourself a folder, put the receipts in it. This could prove valuable at tax time.
2. Doing it yourself.Many small business owners insist upon doing the books themselves, even when they hate it. If you must do it yourself, get some training and bring in a trained bookkeeper on a regular basis to check the books. A competent bookkeeper has the skills to do the job quickly and efficiently and will provide a second pair of eyes to find errors and make suggestions.
3. Failing to track reimbursable expenses. A lot of small business owners pay for expenses out of pocket or using their own personal credit card and then forget to track these expenses and to submit them to the company for reimbursement.
4. Improperly classified employees. Who’s on staff? The expanded role of independent contractors, consultants, and freelancers in small businesses has made it difficult to determine who’s staff and who’s not. This can result in misfiling taxes since there are different rules and regulations for employees and non-employees.
5. Lack of communication. The person handling bookkeeping is only effective if they are kept up to date on all financial transactions. Frequent mistakes include paying out a bonus and not reporting it or making purchases and not telling the bookkeeper or passing on receipts.
6. Failing to reconciling the books with the bank statement One of the fundamental tasks of bookkeeping is reconciling the books and bank statements every month. Some businesses either don’t do it at all or don’t do it properly. Mistakes can compound over time and create a bookkeeping nightmare. This is another good reason for hiring an experienced bookkeeper.
7. Failing to back up documents. In the real world, where audits do still exist, there is no such thing as a paperless office. A paper trail, documentation or verification in the form of backup documents should be available. Even if all your files are on the computer system, there are many instances where a paper trail is a must.
8. Not deducting sales tax. The failure to deduct the sales tax from the total sales is a common one in retail businesses. This gives you a higher total sales amount and does not lower the amount of taxes.
9. Being “casual” with petty cash. Many offices are nonchalant about the use of the petty cash fund. Cash is used without keeping accurate records. Ensure you have a system set up with a set amount of money in petty cash and require that a petty cash slip is filled out each time money is taken out for any purpose. When the fund is gone, the slips will total the original amount and a check can be written to cash to replenish the fund.
10. Miscategorization or overcategorization. While there are fairly standard categories for expenses, they are oftened entered into the wrong categories or too many categories are created. Use general bookkeeping guidelines for standard categorization and use as few categories as possible.

Related posts:

1. Four Absolute Basics of Small Business Bookkeeping Whether you do your own books or use a professional...
2. Employee or Independent Contractor? More and more individuals are working as freelancers and independent...
3. Record Retention Guide: What You Need to Keep What records do you need to keep and for how...
4. Credit Card Receipts to be Reported to IRS Proposed IRS regulations address reporting requirements for credit card and...
5. Fidelity Bonds Many organizations, from the one-person sole proprietorship to giant corporations,...