Listen, not everyone loves bookkeeping – we get it. In fact, we’d go so far as to argue that most people hate bookkeeping, and that disdain can lead to a lot of problems, especially for small businesses that might not be in good habits. We understand! Here’s a promise, though – once you get a good bookkeeping system in place, it will all go a lot more smoothly. This article is designed to help you spot common mistakes – mistakes you could be making! We’ll go through a few, and what you can do to change your habits.
Putting it Off
When there’s a daunting task ahead of us, we tend to procrastinate. As you probably well know, that’s problematic in most instances – the more we put stuff off, the harder it becomes to do it in the future. That’s doubly the case with bookkeeping – dedicating yourself to a bookkeeping system and following those rules is the most efficient way of conducting the process. Every receipt that isn’t properly filed, every transaction that you forget to track – it’s going to all add up to one massive headache at the end of the year. Start now, and don’t stop.
Most people don’t like bookkeeping, and a large subset of those people don’t really understand bookkeeping. The practice of bookkeeping has evolved far beyond the old days of filing everything in folders in a dusty cabinet – there are great methods of tracking your expenditures and income. When you don’t have proper bookkeeping methods, the whole process takes a lot longer, and you can end up with mistakes at the end of the year. Work with a trained bookkeeper in order to create a system that you can easily follow – the better your system is, the easier it will be to maintain good habits.
Taking Too Much Time
The thing that’s the most stressful about bookkeeping is the amount of time and effort it seems to take. As we just addressed, a lot of this can be helped by having a good system in place, and by removing the guesswork from the process. The other thing that can help is having tools that expedite the process. There’s a plethora of bookkeeping software out there that you can access in order to improve efficiency. You should also consider constructing a checklist that you follow in order to ensure that you don’t miss anything during your end of day/week/month/year bookkeeping. That’s another advantage of consulting with a professional bookkeeper; we can help you find the best software, and we can help you create a checklist.
Mixing Personal and Professional
You should be extremely wary of mixing personal and professional expenses. Don’t start a small business as a way of writing off personal expenses. You might be tempted, at various points, to mix your personal and professional expenses; you might forget your business credit card and use your personal card, or vice versa. You have to be extremely mindful of this behaviour, and it’s best to avoid it entirely. Expenses placed on your personal credit card are your liability, which is particularly important if you’ve limited your liability through incorporation. Putting business expenses on a personal credit card or vice versa also makes bookkeeping a lot more complicated.
Not Keeping Receipts
This is a pretty common mistake for business owners – you have a receipt for something that’s not too expensive, so you toss it out. Every one of those individual expenses might seem relatively small, but when you add them all up, it’s usually a pretty substantial total. Avoid the temptation to throw away the small stuff, and at the end of the year, you’ll be glad you kept it all.
Not Using Your Bookkeeping
Okay, so you’ve developed proper bookkeeping habits, you’re keeping even your small receipts, and you’re not charging personal expenses to your business card. Now that you’ve got all of this information, it would be an absolute shame not to use it all. With your spending patterns laid out in front of you, you can use an accounting service in order to see where you can spend money more efficiently, and where you can save money.
Here’s an example: when you get clients coming in, you might get a lot of income from those clients, but with proper bookkeeping, you’ll be able to tell when those clients are coming in, and try to shore up your outreach to increase the number coming in. You might also find you’re spending more on advertising than you should. You might get business card printing in order to ensure that clients know where you are – this is especially important for a newly established business. You might want to use an appointment booking service to help you stay organized. You might lower your inventory after the Golden Quarter is over, and you might find you need more stock when the holidays are upon you. The more information you have, the more easily you can chart a path to business success.
Understanding your profits, your expenses, and your spending habits – this stuff is all absolutely essential to properly running your business. We can help. We won’t just customize a bookkeeping plan for you – we can analyze the data you get from bookkeeping to help you create a growth plan, we can help you create a business plan, and we can connect you with other small businesses in and around Winnipeg. The worst bad habit a business owner can get into regarding bookkeeping? Not doing it. Don’t hesitate to get in touch with us if you need help – we’ll set you up with all the tools you need, so you can focus on what you do best: running your business.