chaos-391652_640Accounting mistakes can be costly to your small business.  It is so important to keep adequate records and stay organized. Avoid these mistakes and your business will keep moving in the right direction.

1. Not keeping invoices organized:

An invoice tracking procedure ensures you can quickly see who owes you money, how much they owe and when the invoice is due. This way, you can follow up on past due invoices faster and keep track of income and expenses. For a low-cost invoice management solution, try either a paper-based file system or the free Invoice Tracker template for Excel.

2. Waiting until tax time to reconcile the books:

Many people put off reconciliation because it can be time consuming. However, if you wait until tax time to reconcile the books, you might make miscalculations and not have sufficient time to figure out what happened. Set aside time each week to reconcile bank statements and check any tax obligations.

3. Miscalculating tax withholding:

For salaried and hourly employees, mistakes in federal income tax, state income tax, Medicare or Social Security withholding can lead to inaccurate tax payments or IRS penalties. If you use Intuit or other software, you can use a paycheck calculator to save time an maintain accuracy. Enter the hours worked and the rate (or salaried information), select the appropriate amount of withholding based on the employee’s tax forms and calculate.

4. Not keeping business receipts:

It’s easy to mistake a business receipt in your wallet for a personal receipt and toss it in the garbage can. However, this makes it challenging to reconcile books and report income and expenses on your taxes. Cultivate a habit of saving every single business receipt by keeping a separate envelope in your car and your bag. Each time you purchase something for business, put the receipt in the special envelope. Periodically clean out the envelope and file the receipts.

5. Misclassified expenses:

When you’re in a hurry, it’s easy to quickly select a category for a given expense or skip classifying the expense altogether. However, this can lead to false reporting. If someone isn’t paying close attention to reported expenses, you can inaccurately forecast trends and make poor business decisions. Regularly look over expenses to see whether something looks amiss.

Have questions? Ask our QuickBooks experts.