The five bookkeeping myths that cost your business money
Bookkeeping is an essential part of any business. An experienced bookkeeper, April Miller, shares the most common bookkeeping myths that people come across. Read the article below to find out how not to let them harm your small business.
April Miller is the owner of Sand Dollar Bookkeeping. Her firm offers virtual bookkeeping and business advisory services. April holds a B.S. in finance, and prior to starting Sand Dollar Bookkeeping, she was a senior-level executive overseeing all financial operations for a management company.
Myth 1: “All my financial accounts and apps are automated and integrated, so I don’t have to check them very often.”
The truth
Your financial data is not a crock pot that you can just set and forget. Automations fail, integrations go corrupt, and the forensic accountant you would have to hire to fix potential compounded damage would be very expensive.
The solution
Schedule 30 minutes at the same time every week to check your financial data in those automations.
Myth 2: “I’m not sure how to categorize this transaction, so I’m just going to add a brand new account. 187 different categories are fine, right?”
The truth
Having disorganized categories leads to unseen duplicate entries, nearly useless financial reports, and a Wild West-style chart of accounts for your business. It’s impossible to make a strategic plan or obtain financing help when needed if your financial information is chaotic.
The solution
If you are just starting out, really take time to create your chart of accounts and stick to them as much as possible. If they’re starting to get messy, take some time one afternoon to merge duplicate accounts and re-categorize as needed. If it just looks like a hot mess and you do not know where to begin, it may be time to bring in a professional.
Myth 3: “I don’t need to bother with reconciling as long as I’m using bank feeds or similar auto entries, right?”
The truth
Wrong! Even Banks make mistakes. Transactions can get duplicated, uncashed checks go unclear, entries get entered incorrectly or mismatched, fraudulent activity happens, and more.
The solution
Set aside time every single month to make sure you are reconciling your checking savings and credit card business accounts.
Myth 4: “My accountant asked if my business is cash or accrual, but that doesn’t matter for day-to-day finances, right? isn’t that just a box he checks at tax time?”
The truth
Nope! This is something that affects every single one of your transactions. If you have been diligent about recording your finances, but handled your business like it’s cash basis when it’s accrual, all that hard work may have to be redone.
The solution
Talk to your tax accountant about which classification is best and why. How does it affect your day-to-day business? There are different pros and cons and IRS rules for each.
Myth 5: “No one cares as much about my business as I do, so no one else can handle my business bookkeeping (and every other task) as well as I can!”
The truth
I think all business owners resonate with this myth. However, good bookkeeping comes from knowledge and experience, not just the love for your business. Besides that, did you really start your company to become a part-time bookkeeper in the evenings and weekends?
The solution
Outsource your financial record-keeping to an experienced bookkeeper or an accountant and stop worrying about the accuracy of your books. Put that freed-up time back into the front end of your business and get your evenings and weekends back.
So remember, getting help with your finances doesn’t mean letting go, or not having control. The only thing it means is that you’ll be able to be calmer in the knowledge that you’re doing everything right.
*The purpose of this page is solely to provide information and should not be considered as financial advice
**Melio does not provide legal, tax or accounting advice; you should consult a professional advisor before making any financial decisions.
