Here are 5 of the most common bookkeeping mistakes small business owners make when it comes to their business finances.

There is no doubt that the accountant of the future will have to be technologically savvy to keep up with the evolving industry. As smart technologies progress and more businesses move their information to cloud-based systems. Accountants need to learn how to leverage cloud computing to provide clients with up-to-date financial analytics and stay competitive. Accounting professionals wishing to use blockchain will need to familiarize themselves with the relevant software and how to establish the transfer of information for books, contracts and records.

1. No paper backup.

When it comes to audits, a paperless office can actually be a significant liability, especially if there are technical issues. Taxing authorities like the IRS want to see a paper trail that includes clear visible documentation and a well-organized system of paper backup copies. Apps that record your receipts can make day-to-day operations easier, but it is always important to maintain a backup of your financial data for at least seven years.

2. Failure to claim or deduct proper sales tax.

Due to the explosion of e-commerce over the past 10 years, sales tax has become a complex issue for many small businesses. Historically, the mistake most often made was simply not deducting sales tax from total sales, which would result in lump-sum surprises at tax time. While this is still true, recent changes to federal law have made collecting sales tax more complicated when it comes to online, state-to-state enforcement. Make sure you and your accountant or accounting software are familiar with the latest rule changes, so you can be compliant and limit your overall tax liability.

3. Petty cash nonchalance.

Each small business that uses petty cash should have a dedicated custodian to manage and approve purchases. This ensures accountability and reduces the risk of fraud, theft and abuse. To this end, companies should have clear policies when it comes to petty cash purchases. And every purchase made with petty cash should be accompanied by a receipt for the expenditure to maintain clear documentation for deductions at the time of tax. Receipts and the rest of the cash must correspond to the initial amount assigned to the fund. When the fund is depleted, a cheque can then be written in cash to restate the total amount. Not having a petty cash policy, custodian or receipts can create headaches for your accountant and can lead to serious problems when taxes are produced.

4. Miscategorization or overcategorization.

Maintaining a clear and organized chart of accounts is key to keeping your books. While most expense categories are fairly standard and straightforward, the mistake many company owners make when doing their own bookkeeping is creating duplicate categories or failing to enter expenses into the appropriate category. Maintaining a clear and organized chart of accounts is essential to your bookkeeping. A professional accountant can help you clean your books and make sure your ledger plan is clean.

5. Trying to do it yourself.

Most small business owners hate doing their own books but insist on doing it themselves. Competent and professional accountants have the skills to do the work quickly and effectively, and they have the expertise to spot subtle errors that might otherwise be missed. As professionals, they will also be aware of tax changes that may impact your everyday financial practices. In the long run, getting a second look at your financial records is extremely beneficial and will save you time and money.

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