While bookkeeping is rarely high on a business owner’s list, it is one of the most essential tasks necessary for its success. The information that effective bookkeeping provides is an important aid to business planning, reporting, and goal setting, among other things. Without accurate and timely financial reports, it’s quite difficult to understand how the company is performing and key trends that may need attention. Whether you’re a start-up or established company it can be difficult to maintain completely accurate records, which may invalidate the benefits of timely reporting. The good news is that your bookkeeping process can be refined by simply looking out for common issues and errors. To help our clients, prospects, and others spot and correct these issues, Keep has outlined the more common bookkeeping errors below.
Common Bookkeeping Errors
#1 Improper System Set Up
Financial statements can provide a great deal of information about your business including performance, efficiency, margins and even areas of opportunity and improvement.It’s similar to a roadmap that can reveal if your product/service mix is optimized, insights on profit margins and where you are spending and investing resources. Unfortunately, since most business owners don’t realize their accounting software can provide these insights they don’t know to ask for them. The result can be that the full benefit of the financial reporting process is missed because management is bereft of the information needed to make well-informed decisions.
#2 Not Reconciling Financial Data Regularly
Reconciling involves going line-by-line through your business records or program and comparing them with your bank statement to be sure there are no discrepancies. Reconciling your ledger at least once a month, along with more thorough quarterly and annual reports, will help you keep track of all income and expenses going through your bank account to gain a clearer understanding of your financial picture, avoid forgetting an item or the specifics of an expense, highlight weaknesses in your processes that need to be addressed and avoid or detect any fraudulent activity.
#3 Trying to Do It Yourself
Once your business starts growing, the possibility of missing certain data or a critical step increases dramatically. There are many ways an outsourced bookkeeper can keep your finances on track, including offering valuable tax planning advice, managing tasks like payroll and accounts payable, and streamlining processes to help you focus solely on service and product development, marketing, and other important business matters. Beyond this, since these professionals work with dozens of companies they have often have access to best practices and information on emerging trends that others do not. This means they can bring unique insight into the process that others are often unable to offer.