A clear record of factors like expenses and projected income is critical to the success of small businesses. For this reason, an accounting strategy through bookkeeping software is essential. With an online approach to bookkeeping, you can ensure that your files are always standing by and available for reference.
A remote bookkeeping service can help businesses who aren’t familiar with this software succeed to their full potential. Sloppy record keeping can cause overspending, inadvisable decisions, and other lapses in judgement. Below are eight of the most common bookkeeping mistakes that can severely disrupt your financial records.
1. Undeposited Funds
Payments that businesses receive from customers via QuickBooks are not instantly allocated to a specific account. Therefore, the remote bookkeeper must manually deposit these funds into your bank account. Until they proceed, these funds will linger in the “undeposited” account. Keeping this money in that account plus the customer’s payment account will cause you to overstate your income.
For example, if a client pays you in September for services from August, then the money will stay in the “undeposited” account until it’s manually placed in the appropriate account.
Being vigilant about allocating your revenue will help these figures stay on track. A virtual CFO can make sure that undeposited funds go straight into the right account. As a result, you’ll avoid frustrating errors.
2. Failing to Record All Assets
When generating a balance sheet, it’s important to include all assets relevant to your business.
Assets make up a significant percentage of a business’s wealth. This includes obvious liquid assets like money, and other less-obvious assets like office space, inventory, undeposited funds, and any technology you use in the operation of your business.
If you don’t record all of your assets, you’ll wind up with an inaccurate balance sheet. This is especially crucial when determining the liabilities relative to your assets. For the most precise measure of disposable income, be sure to keep these figures accurate and organized. A virtual CFO can help you to make an accurate list of this information.
In some cases, it makes sense to duplicate an account in QuickBooks. If you’re examining your accounts with increased income, then this tactic works well. However, if this isn’t the case, a duplicated account can cause a huge headache for your remote bookkeeper.
Duplicated accounts can be overlooked and cause confusion for those reviewing reports. Additionally, logging expenses or income into two separate accounts with the same name can cause the same headache. A virtual CFO can help your company avoid these accounting pitfalls.
4. Duplicated Customers
A strong commitment to details should be the goal for all remote bookkeepers. This is especially true when entering information about clients. Much like payment accounts, an inadvertently duplicated customer account can be a source of great stress.
Regardless of your business model, you should always have a simple way to analyze client payment information. Errors like duplicate customer accounts cause business owners to read incorrect figures about their client relationships. Therefore, this can drastically affect business relationships. If you find duplicate customers, the best response is to merge these two accounts.
5. Duplicated Vendors
Whether you operate an e-commerce store or “mom-and-pop” retail outlet, accurate financial records will go a long way.
Being diligent about entering vendor information correctly will allow you to properly document your long-term relationship. Also, it will help you maintain precise records of balances, and determine the profitability of their inventory. Without all of this information, making informed decisions is almost impossible.
6. Open Bill Reports
For respectable record-keeping, it’s best to pay any bills immediately. Without it, you might accumulate several debts, which can harm your business in the future. This practice will not only help you to stay on top of your payments, but also keep your open bill report page blank.
If a paid vendor bills still appears to be “open,” there could be a larger problem. Thus, it’s important to keep your vendor payments linked to your bills. Without this association, your balance sheet will be inaccurate. There may also be the added possibility of overstating your expenses. Additionally, oversights like this might inadvertently cause overpayment. With a bookkeeping service hosted in the cloud, your records will be accurate and up-to-date consistently.
7. Open Invoice Report
Similarly, open invoices that indicate a client hasn’t paid their balance are also an issue. This lack of association between customers, invoices and payments within the QuickBooks system can impact your earnings.
You should also be proactive in ensuring that this connection remains intact. And doing so will enable you to charge customers for the appropriate amount, rather than a lesser amount. It will also prevent you from overcharging customers, which could have serious consequences.
8. Cost of Goods: Negative Amounts
Another key component to keeping precise financial records is noting how much you spend on materials.
For retailers, maintaining inventory is one of the main costs of operation. By having a negative amount in this line, you’re indicating that you made money by purchasing these goods. In almost all cases, this is impossible. If your business receives an audit while the cost of goods is negative, this may cause further governmental investigation. Above all, a finance-savvy remote bookkeeper can ensure that these numbers are in order, preventing these investigations.
Without information that can be easily understood, your business can’t live up to its full potential. The above tips will help your business to keep organized, direct and clear financial records, which will aid in making informed decisions.
MM Accounting specializes in providing remote bookkeeping services to help small businesses understand and utilize their financials.