Bookkeeping is an integral part of any given business. It is the process of recording the financial transactions of the company. This process enables the company to monitor its financial health, as well as assists managers in coming up with sound business decisions. Bookkeeping requires careful attention to detail because any single mistake can be detrimental to the business. It can even significantly cost the company’s finances, leading to losses instead of gains for the company. No business wants to experience this. That said, it’s important to hire a bookkeeper and to be aware of common bookkeeping mistakes committed by many companies. Below are some common bookkeeping mistakes that you should be wary of:
4 Common Bookkeeping Mistakes
Below are some common bookkeeping mistakes that you should be wary of:
1- No Record of Receipts Less than £10
It’s easy for many businesses to disregard any financial transactions amounting to less than £10. Chances are, you and most of the employees simply toss out receipts with amounts of less than £10. Yes, these aren’t huge amounts of money but think of how much they would sum up by the end of the year. Any single transaction that’s missed out in recording can have a significant impact on the finance’s balance. As a rule of thumb, make sure to keep a record of every transaction.
2- Lack of Communication
One grave mistake in bookkeeping is the lack of communication. Many business owners do not communicate with their bookkeepers regularly. Chances are, there may be outstanding issues on which they need your advice or financial problems that you should be aware of. Also, your business decision should always be anchored on these accounting books. When doing so, you need to communicate with your bookkeeper constantly. This will also allow you to check if the accounting books are up-to-date or not.
3- No Bank Reconciliation
Many bookkeepers are confined to the idea of financial recording, so they fail to perform bank reconciliation. Bank reconciliation entails matching the balances in your accounting records to the corresponding information on your bank statement. Doing so will help your accountant or bookkeeper see if there’s any discrepancy, which may either mean an honest mistake or a deliberate fraud committed. The bottom line, however, is that bank reconciliation ensures the accuracy of your financial records.
4- No Check-Keeping of Petty Cash Funds
Lastly, most companies do not track petty cash expenditure. Chances are, they take out of the cash flow without recording them. Petty cash is a small number of discretionary funds in the form of cash used for expenditures. This simple act of hoarding money, when not properly recorded and regulated, may lead to your business not claiming all of your business expenditure. As a result, your company might end up paying more in business tax. Of course, you don’t want this to happen. As mentioned, make sure to record all transactions, be they big or small.
Ultimately, bookkeeping isn’t only all about tracking and recording all financial transactions. It can also mean financial monitoring and making business decisions. It entails proper book reconciliation and regulation of expenses. Avoiding all the common mistakes mentioned above can bring out the best in your company’s bookkeeping process, serving its purpose well for the benefit of the company.