Business bookkeeping is one of the more tedious and frustrating aspects of running a successful organization. From accounts receivables and payables, to payroll management and business taxes, any company can make mistakes from time to time. However, these mistakes can be costly and disruptive to your business, particularly if the Internal Revenue Service decides to come knocking on your door to conduct an audit. No business needs to experience that hassle.
Here are some of the common accounting mistakes that businesses make you will want to avoid at all costs.
Trying to handle all your business accounting in-house
While some accounting administration can and should take place on property, it is never a good idea to hire a part time bookkeeper to be your sole accounting person. A certified business accountant is a better option. This is someone who has been trained to manage the tax and accounting needs of a business.
Neglecting to track reimbursable business expenses
If you think saving receipts is enough, you are wrong. There are many “invisible” expenses that a business needs to be tracking year-round. These can be things like office space and utilities, marketing expenses, client entertainment, office supplies, travel, and training costs that are reimbursable.
Improperly classifying employees and contractors
A big accounting mistake that many business make is thinking they can get out of paying employment taxes by classifying their employees as exempt, when should be paying taxes. Likewise, with more businesses outsourcing tasks, it can be tempting to classify remote employees as independent contractors.
Not having a backup for the accounting system
Relying on a single accounting system for managing business payments, taxes and payroll is a mistake too. What happens if your computer server crashes, taking all your data with it? Or worse yet, if there is a disaster and all your physical business records are destroyed? Have a backup accounting system that’s protected from these events, which are all too common.
Borrowing money from the employee withholding accounts
It can be very tempting to borrow money from the trust fund that’s been established for employee withholding requirements, such as Social Security tax, employee benefit premiums, and Workers’ Compensation Insurance. Just because you think it’s “your” money, remember that this is a major no-no that can cost in stiff penalties.
Not using a tax diary or inaccurately recording transactions
As a responsible business owner, one mistake to avoid is choosing to not use a tax diary or recoding accounting transactions in error. You will need a clear record to show to the IRS if you are audited – something that’s on the increase in the USA. Invest in a tax diary and update it regularly.
You can avoid some of the above accounting mistakes by hiring a qualified accounting professional to manage your books. Venteon is a leading accounting staffing firm located in Michigan, Minnesota, and Ohio. Get in touch with us today!