Accounting is the most essential task of the business, irrespective of its organizational structure viz, sole proprietorship or company oriented. It reflects the exact position and performance of the firm and the flow of the capital. Whether the profit or loss is obtained through a particular investment is particularly known when books of accounts are prepared without any err. The choice you make in terms of growth and expansion of the firm entirely depends on the financial statement and the total profit generated through the yearly sale.
The preparation of the financial statement, basically, starts with the work of bookkeeping which is done on a daily basis and entries pertaining to different transactions are recorded. Although being a very easy and flawless task, one requires enough precise and attention in order to make it error free. Further preparation of final accounts like a ledger, trial balance, financial statements depends upon the basic entries of bookkeeping. Any mistakes and it would ultimately reflect the profitability of the business.
Usual mistakes a bookkeeper should avoid
● Don’t let it go just because of procrastination: For the beginners or small business owners, it is quite a usual thing to mess up different books and tackle with the mismatch of the balance sheet. Well, it does not mean that you should avoid it and just let it go off. In case of any deadlocks, reconcile the statements of previous months. It would allow you to know the differing amount and the reason behind such differences.
● Combining personal and business expenses: If you have no knowledge about which type of personal expenses are included in the books of accounts they should not do it. We often mix our personal and business expenses which are then recorded in the books of accounts. If you are pretty unsure about it, consult your accountant and they would guide you better.
● Don’t avoid reading financial statements: Being a business owner, it is essential for you to remain informed with the content of the financial statements. Make it a habit to review the books of accounts on a regular basis. It would keep you aware of errs if any. Moreover, within a time you can prevent those errors and avoid any further clashes.
● Poor management of petty cash: The most prominent reason behind the occurrence of errors while managing bookkeeping is poor or bad management of petty cash. Most of the small business owners do not have a suitable idea as to how to track petty cash. A proper system should be established in order to know the actual amount kept in hand for expenses and what else it is being used for.
● Don’t throw the accounting evidence: Receipts and vouchers are the basic evidence which is presented at the time of auditing. We generally want to avoid auditing but when it happens, it is mandatory to present such vouchers and receipts as proof of the transactions. With the introduction of the modern digitalized system, electronic format is introduced which ensures easy retrieval in later periods.
● Avoiding reconciliation of bank accounts and backups: Personal and business bank accounts should be separate else you might mess up at the time of auditing as complete records have to be presented. Proper reconciliation of the bank statements should be done on a monthly basis. It would allow you to know about the potential issues.
In modern days, we are completely dependent upon modern technology where the issues arise without any prior notice. It might even crash your necessary data and you might end up with a loss at the end. Hence, you should be prepared before and have backups for necessary data in order to avoid any sudden losses or system crash.
● Don’t neglect sales tax and don’t treat transfers as incomes: The most common mistake a bookkeeper commit is not reporting or recording the sales tax. Avoiding it on a regular basis might lead to fines and penalties and even legal actions upon the owners. Moreover, incorrect entries increase the totals of sales and ultimately the tax amount.
Without any doubt, a correct and error-free final accounts help in making a genuine decision for the business as you are aware of the financial health of the business. Avoid treating transfers as receipts else it might lead to poor decision making that might affect the profitability of the business. In order to get proper assistance, take the help of TW Accounting Byron Bay.
A genuine accounting team would assist you better as what to do and what not while performing bookkeeping. It is not mandatory to be excellent in every field but you should remain informed about necessary aspects. It would help you monitor the accounting works in a better way. This is because further decisions pertaining to the business is taken on the basis of performance and position as revealed through books of accounts. You should accordingly control the expenses or increase it as per the requirement.