Four Common Bookkeeping and Accounting Mistakes Businesses Make

Proper bookkeeping and accounting are the foundation of any successful business. But at JAYA Financial, we regularly see businesses making some common and avoidable mistakes that weaken their profitability and finances.

Here are some common bookkeeping and accounting errors we see and how to avoid them:

1. Relying on limited information to make decisions—Every day you make decisions that impact your business. Some are small, like switching vendors, and some are big, like a new hire or purchasing equipment that will revolutionize your operations. Relying on your current bank balance or most recent sales report alone can encourage a bad decision. By maintaining a robust report and review process with your accountant, you make more informed decisions.
2. Not categorizing expenses correctly—Every time your business makes a sale or incurs an expense, the transaction needs to be applied to the correct category. If this does not happen, your business will have a hard time accurately measuring its profitability. By understanding each expense and income category and how it is treated from a tax viewpoint, you can achieve greater tax savings, too.
3. Keeping poor records—Recordkeeping is a challenge for most businesses. It is easy to forget about those minor expenses or fail to maintain accurate receipts when they seem insignificant. In the event that the IRS audits your business, however, this can lead to issues.
4. Failing to report sales tax—Your business needs to properly report and account for sales tax. If you overlook collecting and reporting this tax on your services or products, you could be subject to significant penalties and fines. Not reporting sales tax can also lead to an overstated total sales amount.

The secret to avoiding these bookkeeping and accounting mistakes is to partner with an accounting services firm that can keep your business’ finances up to date. For more information about our services and accounting expertise, reach out to us today.