Something that is more exhausting than Math is an accounting. That even happens to business owners. When you are working on the bookkeeping for your business, mistakes can happen if you cannot complete it carefully. When there is a little mistake happens, it means that you have inaccurate financial data for your company. The risk is several poor business decisions. In addition, the accounting errors may bring your company to serious budget issues. Therefore, Impressions WA a professional bookkeeping services in Perth provide you the insight about the perfect sins of bookkeeping and how to prevent them.
1. Ignore the Track of Receipts
Sometimes, business owners do not aware of the essence of keeping their business receipts. Well, it is crucial for their accounting purposes. In fact, it is the evidence to support tax write-offs, especially to the IRS. It means that if you lose the receipt, you cannot claim the expense on the tax return.
To prevent this mistake, you should scan all the receipts into the computer and keep the original copy in a safe place, such as a file cabinet.
2. Inaccurate Logging Major Purchases
You may lose several important tax deductions when you are logging major purchases inaccurately. It can be major merchandise or equipment for your company. The types of the tax deduction for your business depend on the lifespan of the merchandise or the equipment. For example, if you purchase a printer paper and ink cartridges, it means you are purchasing office supplies. You should immediately write off during the year you purchased these supplies. Nevertheless, if it is about copy machines and office computers, it means you are purchasing the long-term assets. As long as this equipment is still usable, the value of the major purchase is possible to depreciate over the years.
3. Never Separating Business and Personal Finances
If you start a new business, it sounds convenient to mix the business and personal finance together. But, bookkeeping services Perth suggest you separating all finances for personal and business. You should also separate the business baking accounts from the personal accounts. This is essential to avoid the intermingling finances. By keeping the accounts separate, it prevents the inaccurate information, which may lead to an audit, especially by the IRS.
4. Does Not Use Earnings Management Strategy
A perfect mistake that business owners make is about taking money from one account, then they use it for another, and they do not make any report and allocate the fund properly. It is essential to have bookkeeping and correct reporting of cash allocation for savings, expenses, and investment. It helps you to keep the accurate financial profile. Besides, it is good for your budgeting strategy.
Your earnings management strategy should help you determine the amount of profit to reinvest back into your company, the payments of large expenses and the needs of the cash flow. By going with the long-term strategy, it enables your business to determine the way to allocate cash, especially to each business account.
5. Inaccurate Financial Reports
Inaccuracies in the financial reports occur when there is an inaccurate recording of expenses and assets. The bookkeeper or the accountant should have a good capability to determine the right business accounting method. This is important to make the cash flow correct. The cash accounting method is the simple way to show the actual distribution of cash into and out of your business. The accrual account method reports and documents the incomes and expenses immediately, not waiting the exchanged cash.
6. Having Multiple Administrative Access To Accounts
You should never give the administrative access to another person. You should provide a separate access for each person by providing different username and password. It would be good if you have a system in the access that provides information about the person who accesses the files including the time. Besides, you should also provide the limitation to the access as the last recommendation from bookkeeping services Perth.