For new business owners, bookkeeping is often seen as a challenging and mundane task that they have to face on a daily basis. Depending upon the number and level of transactions, this activity can be tedious and consume hours at a stretch. That can be probably one of the reasons as to why startup managers avoid keeping up with their finances from month to month.
Of course, that doesn’t sound like a sensible approach, but it is common amongst small organizations. What these fail to understand is that bookkeeping is in fact, a secret weapon for efficient management and growth. It is only with consistent and accurate bookkeeping that you can handle your finances well and take your business to the next level.
So, if you haven’t given much thought to it yet, you must do now. Beware of the mistakes you might commit and take the necessary steps to stop them from happening right away –
- Not Maintaining Monthly Books
I understand that nobody enjoys bookkeeping. But, waiting till your drawers and work desk overflow with receipts is not wise either. That way you may end up struggling to remember what those transactions were all about and whether you have already paid/received payment for them.
My advice here is to do your books weekly; if not, then at least monthly. If the scale of your transactions is huge, better hire a bookkeeping professional who can record and reconcile daily.
- Mixing Business and Personal Expenses
If you have a habit of taking your special clients out on a coffee and happen to forget your business credit card someday, you might think that paying from your wallet is fine. Well, at the moment it may seem so but doing that over and over again can mess up your bookkeeping and tax status real quick.
So, to avoid this pitfall, segregate your money from the business. Don’t use your pocket to fulfil the company’s favors or company’s funds for your personal expenses.
- Improper Recording and Categorizing
Any receipts or expenditures that are not recorded properly or are not under appropriate headings can compromise on accuracy and reliability of your transactions. This problem usually arises with amateur bookkeepers or business owners that lack formal knowledge of accounting practices.
Hence, make sure you call an expert for help who has the experience and training in the respective field to handle your book and can use it as a measure of future prediction and profitability calculation.
- Neglecting the Usage of Bookkeeping Software
As your business grows, managing the books manually can be a daunting process, and the chances of committing errors increase drastically. The errors cannot be just of omission, commission or wrong classification but something as simple and plain as arithmetic mistakes.
Thus, if you wish to move your company forward while staying on top of all things financial, it is best to switch to bookkeeping software. All those manual errors will be gone forever with automated data records.
Peter Beaumont is a senior reporter on the Guardian’s Global Development desk. He has reported extensively from conflict zones including Africa, the Balkans and the Middle East and is the author of The Secret Life of War: Journeys Through Modern Conflict. Email: firstname.lastname@example.org