You know how important it is to keep proper financial records to maintain the health and success of your business. Small business owners often see bookkeeping as a chore that takes too much time. As a result, many business owners do not keep their finances up to date. However, bookkeeping is vital for managing and expanding your business despite how tedious it can be. Here are common bookkeeping mistakes that you can’t afford to make.
Not Having a Business Plan
A good business starts with a good business plan. Many first-time business owners are far too eager to rake in profits without laying down a suitable foundation. Your business plan should also include your bookkeeping process and financial goals. It should layout payment schedules and who is in charge of each task. Having a clear bookkeeping schedule as part of your business plan can keep your business from failing.
Not Keeping Receipts
It is crucial that you hold on to all relevant business receipts. Losing them can cause problems when you complete your tax return or prevent you from claiming back any expenses. It might seem unnecessary to store all your receipts for every single purchase. However, if the IRS has questions, you will be able to provide all the necessary documentation to prove that you wrote off business expenses correctly.
It is common for small businesses to have some record-keeping issues. Especially if you don’t have many employees, keeping track of receipts and expenses can be challenging. However, being organized can save you time and stress when doing your books. Before you launch your business, it is best to figure out where and how you would file your documents.
When you have other people working for you, it is critical that you correctly classify all employees. In general, most businesses have two types of employees: full-time employees and independent contractors. There is a large difference between the two. For example, independent contractors set their hours, submit invoices for the work they complete and are responsible for their taxes. It is a good idea to keep track of everyone’s employment status to avoid any concerns come tax season.
Combining Business and Personal Accounts
For small businesses, it is easy to assume that operating your business with your personal bank account is easy. However, not having separate accounts can cause issues and delays during filing season. And you definitely do not want any problems with the IRS.
Contact Bowman & Company CPA Today
Bowman & Company CPA, PC provides all of our individual and small business customers with experienced, accurate, and affordable financial services. Our financial services aim at decreasing your taxes and increasing your net worth through responsible, timely, and accurate recordkeeping. We offer our services to clients throughout the Washington, D.C. metropolitan area including Maryland and Baltimore County, Columbia, and Howard County. For more information on our offerings, contact us online or call us at (410) 381-8121. You can also find us on Twitter, Linkedin, Facebook, and Youtube.