Good bookkeeping is essential to running a successful business. This fact is only amplified in a small business. While major corporations can often write down losses or pay penalties, a small company is only one or two major bookkeeping errors from going under. Given what's on the line, small business owners need to understand the common challenges of bookkeeping.
Reconciliation
It is easy to look at good numbers in your bank accounts and feel happy. However, you need to e confident that the numbers are right. To that end, small business bookkeeping work includes reconciliation. This is the process of making sure that your current account totals and cash on hand add up to what you'd expect by separately adding all of your realized expenses and profits.
If something seems off, then you have to reconcile where the problem is. For example, you might find that someone accidentally entered the same sizable payment to your company twice. Consequently, you'll have to identify and remove the duplicate to reconcile your books.
Software
Increasingly, companies integrate software to help fulfill their bookkeeping needs. Integration often goes beyond simple bookkeeping. Companies that have inventory and sales systems, for example, often integrate those into their bookkeeping software to streamline the entry process.
If you work with a professional bookkeeper, it's wise to stay on the same software stack as they do. This will ensure that you can quickly share files.
Insufficient Segregation of Roles
While people often think of bookkeeping as merely the tabulation of numbers, it's a larger process. To that end, a company needs to segregate key roles that handle money and the books. While it's tempting in a small business to get more from one employee, this risks overload. It also presents opportunities for embezzlement.
You want to make sure that someone who handles sales, for example, doesn't also do the books. One of the simplest ways to do this is to hire a third-party firm to handle your small business bookkeeping. You also want to ensure that no one person can control the accounts or the money.
Depreciation and Other Deductions
Eventually, you'll use your bookkeeping to do your taxes. Obviously, you want to pay the lowest possible bill. To accomplish that, you need to pan your bookkeeping around maximizing tax benefits. Particularly, you want to depreciate your company's assets so you can reduce your bill. Also, you want to claim every possible deduction.
Reach out to a company like Peggy's Tax & Accounting, LLC to learn more.
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