I still remember the first time I filed taxes for my business. In addition to having no idea what a write-off really was, I also didn't worry too much about guessing on the numbers. A few government audits later, I discovered what it really meant to do things the right way. Over the years, I have met lots of business owners that weren't too worried about fudging the numbers, and nearly all of them have run into problems. Proper accounting is important, which is why I created this website dedicated to business accounting. I know that if you learn the right way to do things and focus on integrity, your business can avoid a world of problems.
Are you about to start using accounting software to manage your business? Many small business owners and self-employed individuals do their own bookkeeping so that they can hand off accurate general ledger reporting to their certified public accountant at the end of the year or quarterly. But the process isn't without its challenges; bookkeeping software can be a bit difficult to get acclimated to, especially without training. Here are a few of the most common mistakes
1. Duplicating Transactions
Modern accounting solutions tend to import transactions directly from bank accounts and credit cards. The problem comes in when you try to enter your day-to-day transactions without realizing that the other transactions will be imported at the end of the month. Each account should consist of either manual or automatic entries -- mixing the two types will lead to confusion.
2. Closing the Month Too Soon
When you do a bank reconciliation -- and you've completed it properly -- you "close" the month so that you can progress without causing any changes to the past periods. But closing the month prematurely can lead to a lot of problems; you could end up with messy adjustments on your ledger, and you won't be able to go back to change things later on. You should only close the month when you're certain everything has been reconciled.
3. Not Backing Up Your Work
As with any software program, you need to backup your work on a regular basis in your accounting software. You should also keep backups from year to year and from month to month in case you need to go back to prior information. This will protect you from data loss, but also from the possibility of a mistake being made and errors being introduced. Sometimes it's easier to just go back to a prior save than to try to fix things in the current file.
4. Failing to Clear Out Old Data
By far, one of the issues that leads to the messiest ledgers is a failure to clear out old data, accidentally inputted data and entirely erroneous information. Checks that were cancelled, transactions that were never completed and unused customer and vendor names should always be cleared out, because they will still show up on the general ledger (the full accounting of transactions) even if you don't reconcile (clear) them. These can easily confuse an accountant at the end of the year.
Most certified public accounting firms will be able to help you get started. And don't forget that you can always complete your own daily bookkeeping tasks and outsource the more complicated procedures, such as payroll and tax reporting, to ensure their accuracy. If you're looking for a certified public accountant, visit Carmines Robbins & Company PLC.
Share15 July 2015
