When you are running a business you are responsible to keep records that account for your financial situation. You need to be able to account for what is earned and spent so that you can have your taxes done properly. If you are not accurately keeping your books up to date you can end up spending more money in taxes. Most businesses don’t have the funds to overpay and make these types of mistakes. They can be large enough that it could cause a business to be unable to continue. You also can find yourself in hot water if you are not paying your fair share in taxes. Whether you are a small business or a large corporation you need to avoid making bookkeeping mistakes. Mark Dicus & Company outlines some of the major bookkeeping mistakes to help you avoid them.
When you are running a business you have to have some form of payroll. You could have a large number of employees or even just a few. The payroll plays a big part in your business and has its own taxes that will need to be paid. You also use the amount of payroll that your business has expended to pay your own business taxes as well. A mistake that some people make when they are keeping their own books is how they input the payroll. The gross wages that were paid should not be placed in the net paid out column but on the income statement. This small mistake can lead to overpaying in payroll taxes.
Not Preparing Bank Reconciliation Statement
There are some businesses that keep their books all year round and then when it is time to balance them out and reconcile them they do it all at the same time. The problem is that if you wait a full year to reconcile you will have to look that far to locate a potential mistake. This can be very time consuming. It is best to be sure that you have time to reconcile the accounts all at the end of each month. It will make the mistakes smaller and filing taxes a simpler process.
Reporting Income & Expenses
The job of a business is to make sure they are making money. This does not happen out of the blue but takes effort. It also means that the saying is true that you have to spend money to make money. The process of a business spending and making money will create how much is made in the end. If you are using a bookkeeper that does not have the right amount of experience you could end up with lots of mistakes. The income and the expenses need to be kept track of and reported correctly to ensure that you are not overpaying on what your business is making. Misreporting any of these items through the year can end up being detrimental to your business.