Proper bookkeeping is essential to any business, from 1 man sole proprietorship to large corporations. Proper  bookkeeping makes sure your tax returns are accurate, keeps you on top of your cash flow, and helps you keep track of income and expenses.

Here are 10 common bookkeeping mistakes of small businesses:

  1. Not saving receipts of less than $75. These receipts may not be required by the IRS, they do provide backup documentation for your deductible expenses.

     

  2. Not tracking reimbursable expenses. Maybe you paid for those office supplies with cash from your wallet, or maybe you just forgot to save the receipt for that new computer. Either way, if you are not tracking your reimbursable expenses you lose out on valuable tax deductions come tax season.

     

  3. Not properly classifying employees. Many businesses have different types of workers, from full time employees to occasional independent contractors. If you don’t properly classify these employees, it may cause problems when preparing your taxes.

     

  4. Lack of communication. If the person handling your books is not aware of transactions such as expenses or employee bonuses than your books will be inaccurate and this will cause a lot of problems down the road.

     

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  5. Not backing up your records. It may be the digital age, but it is always good to have paper copies of your receipts. It is also extremely important to backup your bookkeeping files.

     

  6. Not reconciling the books with the bank statement each month. A lot of businesses do not do this, and this can create problems. Also doing this improperly can be problematic.

     

  7. Forgetting to deduct sales tax.  A fairly common mistake in retail businesses is not deducting the sales tax from the total sales. This results in a higher total sales amount and does not lower the amount of taxes due.

     

  8. Petty cash records. Many businesses are not careful with their petty cash. Any time money is taken out of petty cash, a slip should be filled out with the amount taken and reason. The total receipts should equal the total amount of petty cash taken out.

     

  9. Improper categorization of expenses.  Inexperienced bookkeepers may improperly categorize expenses which can lead to bookkeeping errors.

     

  10. Not having a professional CPA handle their bookkeeping. Proper accounting records are important to your business. We strongly recommend having your books maintained by a professional accountant to avoid errors and problems during tax time.

     

Does your small business need help with bookkeeping or other accounting needs? STL Tax in Brentwood, Missouri serves the Greater Saint Louis area. Call us today at (314) 645-1614.