Small Business Bookkeeping Mistakes to Avoid

Running a small business is incredibly challenging, and having to oversee your own finances only adds more challenges to an already overflowing plate. In this blog, we’ll outline some of the most common mistakes small business owners make when handling their own bookkeeping and accounting, and discuss how outsourcing can provide tremendous value.

 

Mistake 1: Trying to Do It All Yourself

Handling all bookkeeping and accounting functions, particularly if they didn’t have a degree or background in accounting, has been the downfall of many small business owners. Not only do they not have the time to keep accurate books and make thoughtful forecasts, but many small businesses are plagued by chronic bookkeeping mistakes that damage their financial viability. Whether it is failing to categorize expenses properly (for example, conflating personal and business expenses) or missing critical deadlines, there are many ways that doing your own books can cause major financial hardships for your business.

There’s a reason you hire an architect to build your house or go see a mechanic to get your car fixed. You should think of bookkeeping no differently and leave it to the experts. Though doing everything yourself may seem like the more affordable option, it often leads to costly mistakes and headaches that could easily be avoided through outsourcing.

 

Mistake 2: Not Giving Yourself Enough Time

Few people look forward to bookkeeping. It can be easy to let a pile of receipts stack up, not realizing that this procrastination can have serious consequences for your business. Additionally, if you’re feeling overwhelmed, you're much more likely to make mistakes by trying to speed through your bookkeeping and get it over with. Instead of feeling the time crunch and constantly playing catch-up, let an outsourced professional shoulder the burden, then you can focus on running your business. 

 

Mistake 3: Not Understanding Your Finances

Some small business owners are able to get their books done on time and error-free, but have a hard time deriving insights from the numbers in front of them. It’s one thing to do your books, but it’s another to be able to truly understand them, observe trends, and make informed financial decisions. Financial analysis is a skill that comes with time and experience, and time isn’t on the side of most small businesses. In fact, 20 percent of small businesses fail in their first year, with 50% failing within the first five years. Many of these bankruptcies could have been avoided had the businesses decided to work with an outsourced bookkeeping partner early on that could have provided the financial insights, forecasts, and recommendations to build a solid business plan. 

Another common mistake in regards to understanding finances involves the categorization and identification of costs. Many small business owners are so wrapped up in their work that they fail to recognize costs associated with their products or services and fail to properly categorize those costs so that their books provide an accurate picture of where money is being spent. This creates convoluted books that are nearly impossible to derive any tangible insights from. Outsourcing your bookkeeping ensures all aspects of your business are accounted for, and your books are not just accurate, but a resource you can learn from. 

 

Mistake 4: Hiring an Inexperienced Bookkeeper

Small businesses often run into trouble when they try to cut corners by either hiring a cheap full-time accountant or trusting a low-cost outsourcing agency. As the saying goes, you get what you pay for, and the $10-per-hour bookkeeper you hired off Craigslist is going to give you $10-per-hour quality. It’s one thing to make mistakes yourself, and quite another to trust a stranger and lose visibility into finances altogether. Outsourcing your bookkeeping and accounting is an important and consequential decision, so you need to make sure you’re making the right choice. References are key. Your outsourced bookkeeper should be considered a trusted financial partner who can not just identify problems with your business but recommend concrete solutions. 

A few words of wisdom: the advice of an outsourced bookkeeper is only useful when it is followed. Although it may be cumbersome or time-consuming to implement changes suggested by your outsourced bookkeeper, not following their guidance means you’re wasting valuable resources and not getting the most of your relationship or your business.

 

 

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With the help of an experienced outsourced bookkeeper, you can finally take off one of your many hats and trust the experts with your finances while you focus on running your business. Best-in-class outsourced partners provide you with in-depth analytics and visibility so that you can be more informed than ever whilst freeing up valuable time. 

finairo offers a wide range of outsourced bookkeeping services, working with small and medium businesses to help them grow through sound financial decisions. Request a consultation to learn more about how finairo can help empower your business through accurate, timely, and insightful financial practices.

 

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