Even a computer is man-made and saying that it will be completely error free in its processes would be incorrect. Having said that, a human bookkeeper, though extremely important, can still cause error. While we do make an exception for it, one needs to understand that frequent errors might mean that the person is not exactly responsible, or in other cases, if it is you yourself, you might also be overburdened and that might be exactly why you need to hire a bookkeeping services provider online.
Here are common bookkeeping mistakes and ways in which one can correct or avoid those:
Saving of receipts for small amounts
They may not be required by law, but receipts for small amounts can provide a backup for many of the tax deductions you want to apply for. They also assist you when you have employed a bookkeeping and accounting services provider for correct recording. Keep a neat folder of those receipts or, better yet, use accounting software to scan them. With the right app, you can even take photos and save them with your mobile. They can also help you keep track of what you spend.
Perhaps more than one person in the field works on books. You may receive administrative support a few days a week, but make the big decisions yourself. The simplest things can be misunderstood, so make sure you keep written and chronological notes of the discussions you have and check that you have the same understanding of the processes put in place. Any sound bookkeeping and accounting services provider would do the same.
Reconcile the accounting books with the statement on a monthly basis
The basis of good accounting is to ensure that the books are reconciled with the bank statement at least monthly. The more often you do this, the sooner you will notice errors, both internal and in the bank, and the more time you will have to correct them. Electronic banking makes everything easier, especially now that it can be integrated with online accounting software.
Backup of files and records
Many bookkeeping records will still be kept on paper. They should be well organized and safe. However, they can also be replicated or scanned into software that can be backed up to disk locally or in the cloud. If your computers get damaged unexpectedly, a cloud version of your records will help you get back up and running quickly.
Recording after sales tax
If you work in retail or need to add sales tax (VAT) to the price of goods or services, remember to deduct again when measuring your total revenue. This is a common mistake and can give a misleading impression of how a company is doing.
Keeping track of petty cash
Small change is not free money. It’s the company money. You need to buy special things in the office, but avoid diving for whimsical items. They add up quickly and are unlikely to be properly accounted for. Also, if different people buy the same items over and over again for small bucks, it might be better to bundle the expenses together and get a better price.
Frequently asked questions
Is it okay to combine personal accounts with my business accounts?
Many people start successful businesses from their kitchen or garage tables, but you need to draw the line between business and personal accounts. To be tax efficient, you will need to claim any legitimate business expenses that come to mind. But that doesn’t apply to some beers with friends after work. Confusing the two accounts can be confusing.
Is it okay to delay posting accounting and bookkeeping transactions?
It is human nature to put off life’s boring tasks, and accounting is chief among them. But the longer you leave it, the worse it gets. Not only that, but your accounting will get more and more out of date, which means you’re not tracking performance. If something goes wrong, you won’t know, perhaps until it’s too late.
Do I have to do all the accounting by myself?
You pay an accountant for a reason; you do not have to do all double entry bookkeeping by yourself. And it’s not just about adding up the receipts. Whether you are just starting a business or are looking to grow, your accountant can offer valuable advice on best accounting and accounting practices. If your books are well sorted and up to date, they will have time to discuss and submit your required tax return.
Are all omission errors fraudulent?
Any error that will give you a financial misrepresentation and would alter the stakeholder’s decisions significantly might account for a fraudulent error. However, the intent, the measures taken to correct it and the extent of misrepresentation should also be taken into account before such a conclusion is arrived at. An independent bookkeeping and accounting services provider might be able to determine better.
How does double entry bookkeeping helps with correct record keeping?
As the simple rule suggests, debit should equal the credits. This is the basic to know if transactions are being recorded in the right manner. However, this should still not guarantee that all transactions are correctly treated and a double entry bookkeeping services provider might be able to help.
Take full advantage of your software. If you use software from a reputable company with years of experience in the market, the system will be designed to copy best practices and help you operate effectively within the law. The best software is easy to use, but invest time in reading the manual or doing some online training. It could save you hours of scratching your head and could prevent costly mistakes from creeping in. It is always worth contacting the software vendor for assistance. If you have less time, hire an accounting and bookkeeping services provider.