From sole proprietors to major corporations, bookkeeping is a significant part of any business. While it is typically not one of the more exciting jobs, bookkeeping is at the heart of a company's success, and errors can cost the company significantly. Here is what you can do to keep excellent records.
Use standard categories for expenses. Review your categories with an accountant to make sure that expenses are entered into the correct categories. You also want to make sure you are not booking the same type of expense to more than one category. Use general bookkeeping guidelines for standard categorization and create as few new categories as possible.
Having someone handle the bookkeeping is only effective if they are filled in and kept up to date on all financial transactions. Have a system to communicate and share information!
Deduct Sales Tax
This is common a common mistake in retail businesses. Reduce the total sales amount and decrease the taxable income by deducting the sales tax. The total amount you collect is not considered income. The sales tax is an in and an out and is not recorded as income. It is booked on the Balance Sheet not the Profit and Loss.
Going “paperless” is an environmentally friendly idea, but difficult to do in the office. Audits are real - it is your responsibility (and cost) to provide the records needed in an audit. Make sure that you can provide documentation for all information on your Profit and Loss, whether electronically or in paper form.
Hire A Professional!
Having a competent bookkeeper can be extremely beneficial. They have the skills to do the job quickly and efficiently, saving your business time and money. They also help find errors, protect the business from fraud and make helpful suggestions for the future.
Properly Classify ALL Employees
Who is a contractor? Who is an employee? Know the IRS descriptions and make sure you are protecting your business by using the proper classifications. Proper classifications are very important in Workmen's Compensation Insurance too. Putting people in the wrong classification in either situation can be a very costly mistake.
Save ALL Receipts, Even receipts under $75
They may not be required by the IRS, but they provide backup for your deductions claim.
Have a filing system for all receipts.
Separate Personal Finances From Business Books
Small business owners often make the mistake of paying business expenses with their personal money. Your personal and business books should be separated, but if you do use your personal money, make sure to keep the receipt and track the expense on the company's books.
Reconcile Your Books Monthly Against Your Bank Statements
This is the best way to detect fraud, find errors and keep your books current. It is the Holy Trail of your business.
Track Your Petty Cash
Create a system to track Petty Cash and how it is used. There is a correct way this should be done. I know, I know...
Quality Accounting Solutions can help you avoid or solve all of these problems!
Contact us to correctly set-up your QuickBooks or to discuss improving your bookkeeping system. Remember, if you are a new client, the initial consultation is FREE!