Seven Common Bookkeeping Mistakes to Avoid
When it comes to small businesses, people often tend to put in little effort in the bookkeeping process. Although all business owners have a bookkeeping system, it is usually not kept up to date. Business owners go by months without maintaining the books because it is time consuming and it can be tedious.
However, what most business owners don’t realise is that bookkeeping is their biggest weapon they can use for managing their business and helping it grow. In order for a business to grow, it is important that all financial records are maintained regularly and consistently. You can hire an accounting firm in Singapore if you wish to outsource your accounting function and get professional expertise for your business needs. It is important to consider that when it comes to bookkeeping, little mistakes or inaccuracies can cost you lawsuits.
Here are the most common bookkeeping mistakes that you must avoid at all costs:
This is probably the most common mistake made by business owners, as they often forget to file the receipt or lose it. These receipts sometimes seem insignificant but in the long run they can become an error in your books. If you maintain your records regularly, it will save you a lot of time and even cash on your income tax. In the event you are audited by the IRAS, maintained and accurate records are necessary. If your records aren’t correct or accurate you may end up facing thousands of dollars in fine.
Formal bookkeeping is a process that your accountant must be familiar with. If you are unaware of the categorization of income and expenses, then you can be in trouble. Precise tracking of your company’s expenses and income can guarantee accurate calculation of profits. If you know how to treat the income and expenses categorically, you may also save from your taxes significantly.
Same Personal and Business Bank Account
If you use the same bank account for both your personal use and business activities, then you might face a problem when being audited. You can use separate bank accounts, or ensure that records must be set straight and not overlapped. In addition, remember to properly manage your bank statements each month so that you have all the details and transactions on paper.
In the world of technology where everything is digitally stored and in hard drives, it is important that you keep at least one copy in a separate backup in case of a mishap (Also see Bookkeeping and Accounting System Weakness). There is always a possibility that you can lose your data any time. It is better and safer that you take precautions and are protected from the consequences.
Ignoring Sales Tax
Many people don’t account and report sales tax. They often overlook the fact that record keeping of sales tax is essential and can lead to heavy penalties and fines. Incorrect data entry also leads to a higher sum with a higher sales tax applied to it.
Not Cataloguing Staff Properly
Many businesses have employees working for the company as full time and freelance workers. Make sure that you classify them correctly in order to save yourself from extra taxes.
Mismanagement of Loose Cash
Keeping track of small cash amounts becomes quite difficult and tedious for business owners. Because they don’t know how to track it, a great way to start is by keeping a cash lock box and attaining receipts for the distributions or payments.
These are the top 7 mistakes that bookkeepers usually make. If you are one of those then find yourself a good tax accountant. If you are looking for Singapore best bookkeeping services island wide, consider those that are affordable yet reliable and provide excellent service.