MONEY MANAGEMENT: 5 BOOKKEEPING PITFALLS
Money Management: 5 Bookkeeping Pitfalls
Last month, our Sparklers learned all about the money mindset, money blocks, and how to become comfortable with and attract wealth. Sounds great, right?! Earning an income from your small business is wonderful, and sharpening your bookkeeping skills will help you get more out of your money. How important is business bookkeeping? These five pitfalls will help answer that question.
Pitfall #1: Failing to keep books. It’s easy to think that because you’re a new business or because you don’t produce a lot of income at first that you can just start bookkeeping “later on.” Nothing could be further from the truth! Without accurate bookkeeping, you won’t know profits from losses or be able to celebrate your financial accomplishments. Sure, you can have a ballpark idea of where you stand financially, but it’s best to keep something more accurate. Plus, looking back on books from year to year will help your financial planning for future years.
Pitfall #2: Misplacing and throwing away receipts. Business related expenses usually count as deductions, and deductions can make a difference in your taxes (in a good way!). So many small business owners toss away a receipt for coffee or a snack in between meetings and write them off as a “just small amounts.” However, those “small amounts” could add up to more than $50 per month, and that’s some serious cash (especially when you are starting out). It’s better to play it safe – keep all those Starbucks receipts because they may just add up in your favor.
Pitfall #3: Pretending bank statements don’t matter. Let’s have some real talk: Do you open your bank statements, or do you toss them into your desk drawer and let them collect dust? Bank statements are an important part of keeping accurate books, and reconciling them each month may open your eyes even more to your business finances. In the era of subscription services, you may not even remember what you’re spending money on! Your bank statement reveals if checks were cashed (and when), any electronic funds transfers, and (hopefully not) if someone has compromised your account. Always reconcile!
Pitfall #4: Combining personal and business expenses. When you’re just getting started, pouring personal expenses into your business is pretty common. The issue is when you use a personal debit card or checking account to pay for business expenses. Transferring is key – always transfer money into your business banking accounts so you have accurate statements and the money comes and goes from the same place. In the event that you are required to show your books, one of the ways you’ll be prepared is by keeping personal and business expenses separate.
Pitfall #5: Tackling complex taxes on your own. It may seem cheaper to perform your own taxes, but you may be costing yourself more money than you realize. Tax professionals and Certified Public Accountants (CPAs) are trained to understand our complex tax code. Many of them are experts at saving you and your business money. Investing in a tax professional can not only help you save, but can also give you an extra layer of protection if anyone questions the numbers on your tax returns.
Note: This information should not be considered financial advice; it is an opinion piece. At Sparkle Hustle Grow, we are not tax or financial professionals. Please seek a tax professional if you would like to further explore these topics and receive certified financial assistance/advice.