Every business, whether it is a sole proprietorship or a large corporation, needs bookkeeping. Even though bookkeeping isn’t typically one of the more glamorous jobs, mistakes can have a significant negative effect on a company’s bottom line.The following list contains ten of the most common errors that you should avoid.

Although bookkeeping is undoubtedly not one of the more enjoyable aspects of the job, it is crucial to the success of small businesses. Thus, errors could have disastrous results.

At first glance, bookkeeping may seem to be a simple task if you are familiar with the best techniques. On the surface, managing the accounts yourself appears to be a cost-effective strategy.

There is, unfortunately, a lot of room for error. Furthermore, a lot of small business owners are prone to bookkeeping mistakes that could hurt their chances of success.

Following is a list of the top 10 bookkeeping mistakes small business owners make when managing their company’s accounts:

1. Not Holding on to Receipts Under $75:

Even though the IRS might not require them, receipts under $75 provide supporting documentation for many of the deductions you might claim. Even though keeping receipts in a folder or box is still necessary in the event of an audit, the majority of online and digital accounting solutions offer companion apps that let you take a picture of your receipt and match it with the appropriate register entry

2. Neglecting To Monitor Reimbursements:

You may be reimbursed for any expenses that you incur on your client’s behalf. Due to the possibility of charging them back to the customer, the majority of business owners forget to enter them in their expense log.

Like other expenses, the source of this charge should be documented in the books. Inaction could result in financial loss. You will also miss out on tax deductions.

If you don’t keep track of your reimbursable charges, it’s like throwing money away. Tax deductions could also be lost, which would be equivalent to losing money. Again, a variety of tools and apps for tracking spending can make this process quick and accurate.

3. An incorrect classification of employees:

Today’s businesses employ a diverse range of individuals to work on a number of initiatives. You can even hire independent contractors and freelancers. If you incorrectly classify them as employees, you risk legal repercussions as well as possible tax penalties.

Nowadays, it can be difficult to distinguish between employees and independent contractors, consultants, and freelancers because there are so many of them. But remember to carry out this. Misclassifying employees and contractors can result in costly consequences, including tax penalties and legal action.

4. Failing To Make Modifications:

Reconciling your books and bank accounts is one of the most crucial steps in evaluating your financial situation. Making sure it is done correctly and consistently is essential. By balancing your books, you can find bank errors before they become serious problems and see how much money you have on hand at any given time.However, reconciliation can be difficult, so working with an experienced bookkeeper is highly recommended.

5. Lack of Paper Backup:

For auditors, a paperless workplace could pose a serious risk, especially if there are any technical difficulties. Taxing authorities like the IRS prefer a paper trail with readily available records and an efficient system of paper backups. Even though apps can make daily tasks easier by saving your receipts, it’s still important to keep a backup of your financial records for at least seven years.

6. Not Collecting Or Retaining The Correct Sales Tax:

Due to the growth of eCommerce over the past ten years, sales tax has become a complex issue for many small businesses. The most common mistake they used to make in the past was to simply forget to deduct the sales tax from the total sales, which led to lump-sum tax surprises.

That still holds true, but recent changes to federal law have made it harder to collect sales tax when fulfilling state-to-state orders online. Make sure you and your bookkeeper are informed of the most recent rule changes to remain compliant and lower your overall tax liability.