Most entrepreneurs cover almost all the basics of business planning except one important aspect that may as well be deadly for their business- bookkeeping. The notion among many startups is that the bookkeeping bridge will be crossed later, well, until it is too late.
New businesses fail not because the owners are not excellent businesspersons but mostly because they do not appreciate the value of proper, accurate and up-to-date bookkeeping. Don’t just trudge through the task of keeping your accounting books, learn and avoid these common mistakes that can be avoided with the best free accounting software.
As an entrepreneur, you probably have so many tasks to do with you being the only one managing your business. Since bookkeeping is not an easy part of your business, you may find yourself postponing when to check up on the position of your account until it is time to file a tax return. Be consistent with your bookkeeping especially your bank reconciliation.
Keep track of the financial standing of your business by reconciling your bank statement with your cashbook balance at least once in a month to ease the laborious process of bookkeeping. You can also automate your accounting process by using the best free accounting software.
Improper Record Keeping
It may be difficult to remember where a particular receipt is kept or when a particular invoice is due when all your records are jumbled together. Some businesses have closed down because of bad debt from lack of updated record. Keeping a detailed record of different transactions require the knowledge in filing and categorization. Miscategorization of expenses or income can be detrimental for any startup.
Avoid this mistake at all cost by keeping detailed and updated copies of receipt and invoices and maybe improving on your filing system. Follow the appropriate guidelines while making categorization in your accounting books by using the best free accounting software.
There are reasons entrepreneurs are advised to use free accounting software and one of them is the guarantee of synchronization among devices and the cloud backup it affords. However, some business owners still prefer the old paper-pencil accounting method. The two has one common risk and that is the loss of data due to lack of effective backup. For users of the traditional method of bookkeeping, there is a risk of fire and other means of losing information, which might never be retrieved.
Be security conscious. Have an efficient backup for all your data using the best free accounting software. It boils down to upgrading to the use of accounting software with cloud backup features and then go extra length of keeping some paper copies- you can never be too careful.
Learning the rope of the trade in business does not only imply knowing your numbers but putting them in appropriate places in your accounting books. Your account receivables, account payables, invoice, and other important basics must be recorded adequately. Many a business has closed down because of a simple, easily overlooked miscalculation error. Even when you are using accounting software, be sure to know how to use the features, otherwise, you may commit an irreversible accounting mistake.
Be calm when making any input and carry out a regular update to avoid rushing when entering data in your account books. Double-check the data before and after you make any input to ensure thoroughness.
Mixing Personal with Business
Sometimes when petty cash is needed by the business, a business owner usually finds himself using his personal money and the same goes for when an expense is made personally with business income. An entrepreneur will most likely not reimburse this money into the business. It can be a little blurry to differentiate your personal financial standing from that of your business if you do not separate the two from the very beginning using the best free accounting software.
Open a bank account separate from your personal account for your business. Ensure you reimburse any money taken from your business for personal purpose and don’t forget to keep a proper record. Using bookkeeping software that is linked to your business bank account helps to keep track of your expenses. While you are at, have a petty cash account, that way, even the smallest expenses will be recorded.
Be an informed entrepreneur avoid committing these blunders in your bookkeeping by using the best free accounting software