Probably out of ignorance or in an attempt to save money, some business owners try to handle the bookkeeping function themselves but by so doing they make mistakes which come to haunt them later. While there are plenty of bookkeeping functions that can be done in-house (either by the business owner or by designated accounting staff), there are functions that are best handled by pros who dedicate all their time to this important function. What are some of the most common mistakes that you could make when you carry out this function in-house?
Failing to back-up documents
Some companies have huge amounts of documents in paper form and some fail to create a back up for such documents. Should an accident (such as a fire) happen, you risk losing all your documents and your accounts will be in disarray if you do not have a back up. Today, it would be unfortunate for a business to find itself in this kind of situation as there are many ways to backup documents including cloud bookkeeping.
Failing to track cash expenses
Businesses pay for expenses through a myriad of ways including checks, debit cards, credit cards as well as cash. Expenses settled through check or cards are usually easy to track but cash expenses are easily overlooked. Unless a business develops a system track cash expenses, the entries in its books will be incorrect.
bUnless you are an accountant, bookkeeping can prove not only utterly boring but could also take away much of your precious time. Even scarier is the fact that the hectic nature of some people’s lives might make them forget to make their tax returns in time and the consequences could be catastrophic. Whether yours is a sole proprietorship, a small business or even a large corporation, bookkeeping can take plenty of your time. Even when you have employed staff to do this task, the fact is that you did not set up the business to do accounting and the staff you employ to do this could be better employed performing tasks that are core to your business. Bookkeeping errors can be costly in various ways and all attempts should be made to avoid them. For starters, such errors make you fail to fully understand the direction in which your business is going with the result that you could end up losing money. Bookkeeping mistakes could get even costlier if you were to get in trouble with the tax authorities. Penalties for such mistakes vary but in some cases they might lead to imprisonment. When the service is outsourced, the risk of errors and mistakes is virtually non-existent and should any mistakes be made they fall squarely on the accountant. Tax authorities are generally in favor of outsourcing bookkeeping services. The reasoning by such authorities is that since the people conducting the services are independent contractors, there is little risk of doctoring records as sometimes happens when this service is carried out in-house. Moreover, outsourcing saves the business money since this service is an accepted tax deductable expense. When the service is conducted in-house, it is not an allowable expense and it therefore increases your tax liability. Perhaps the main reason that should make business owners outsource their bookkeeping services is the fact that it is very easy to forget the dates when specific returns are due. Should you find out that the time is almost due, you might find yourself doing the accounts in a hurry thereby increasing the risk of making costly errors. When the service is outsourced, there is no such risk – the accounting firm you have contracted does bookkeeping as a full-time job and have a thorough understanding of the due dates of all returns. Remember also that changes in legislation tend to be rather frequent and people outside the accounting profession might be unable to keep up with all the changes. Bookkeeping could be challenging for non-professionals and rather than let it waste your valuable time it is best to outsource it to the professionals.
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