by: Amber Peoples, President, Atlas Services February 15, 2022
Have you ever wondered why some small business owners keep such detailed records, while others do not? The difference between these two groups often comes down to simple mistakes that get repeated over and over again and cause their businesses to lose money. Here are five mistakes that small business owners make when it comes to bookkeeping. Avoid them, and you’ll be on your way to boosting your profits, too!
If you’re not a numbers person, there’s a decent chance that you don’t know what bookkeeping is for. It’s vital that you understand your role as an entrepreneur and how it relates to finances. Bookkeeping is like writing down every day items in your checkbook. Just imagine if you didn’t write everything down… You can probably think of many mistakes you would be making by now right? The same thing goes with bookkeeping… Knowing how much and on what you spent is vital to knowing the financial health of your company.
Many small businesses don’t reconcile their bank statements on a monthly basis. That’s a problem, because reconciliation is how you check for and address errors. And without that process, your company could be facing financial headaches (or worse) down the road. The solution: Reconcile those statements every month! This ensures that all of your financial transactions are properly accounted for in your accounting software and eliminates major problems before they begin.
Small purchases of inventory, office supplies, etc. are easy to ignore or forget about. But if you’re trying to maximize your return on every dollar you spend in your business, you need a system for keeping track of those smaller purchases and managing them. Small purchases can add up quickly and not tracking them can lead to exponential spending. Setting a budget is the best way to setting limits on expenses (if you stick to it).
A good rule of thumb is that you should have backups for your data at least once a day. Many online programs will do nightly backups, but then again there are some that don’t do anything at all. This can leave you with many hours worth of work lost and no way to recover them. Try to look for a program that does frequent backups, allowing you to continue working throughout your day without having to worry about losing any data or not being able to access it. Cloud based systems have made it much easier for business owners as the information is available 24/7 and there is no need to retain paper copies.
Cash flow is a lot like blood flow. It’s good for your body to have constant access to fresh blood; otherwise, you can die. Likewise, cash flow problems can be deadly for your company—they cause interest payments and credit card fees that continue to drain money away from your business while stressing you out even more (or potentially leading you into bankruptcy). That’s why your number one priority should be figuring out how much cash will be coming in and going out of your business on a daily basis.
Want more information about how Atlas Services can help you avoid the mistakes above? Call/Text Amber Peoples at 720-577-4920 or email at firstname.lastname@example.org or schedule a Zoom meeting.
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