By Dwayne Briscoe, Bookkeeping-Results LLC
Submitted by Steven Kay, Steven Kay Media LLC
Mistake #1 – Not getting good help. Many people think that as long as they can balance a checkbook halfway, it’s possible to keep the books for a business. Teaching and training in a variety of settings for over five years, there are two questions that always come up. 1. Why do I need to know accounting to operate QuickBooks? 2. What do taxes have to do with QuickBooks? The answer is simply – the Internal Revenue Service (IRS). The field of accounting and the U.S. tax system work hand-in-hand with each other, and not having a good resource to make sure that your finances are correctly maintained can be a costly mistake that can cause the demise of your business. Just because you hire a relative, friend of a friend, or a pretty face, doesn’t mean they can handle your books correctly.
Mistake #2 – What records? Bank statements, credit card statements, and hand-written notes on what you spend in a ledger are not adequate avenues of record keeping. During an audit, accurate copies of invoices, receipts, bill of sales, etc. are what is required for verification and your defense on what you put on your taxes. A document should contain the date, vendor/customer, address, what is being sold or bought, and the amount of the item(s). A shoebox with everything is not an answer, either, to your record keeping system.
Mistake #3 – The runaway train syndrome. So many small business owners are so obsessed with making money, they feel that they’ll get their books “caught up” until it’s too late and time to file their taxes. Even worse, they wait several years before deciding it’s time to accomplish the task at hand. Between sharing personal and business credit cards, personal and business bank accounts, as well as taking out large sums of cash with no back-up is a recipe for disaster in your business to fail before it can succeed.
Mistake #4 – Why back-up my information? First off, paper documentation can fade, be misplaced, destroyed by accident, etc. The same can happen with computer files, whether you’re using QuickBooks or Excel spreadsheets. This is why scanners, flash drives, and back-up systems are available to protect the information. The IRS can go back as far as six years, and just because you don’t have the information to back-up your tax return figures, doesn’t mean that you’ll be forgiven. Yes, the IRS doesn’t require receipts under $75.00, but that doesn’t mean that you can work without them. The devil is in the details and you would have no one to blame but yourself if you lose all of your data.
Mistake #5 – I don’t have time to talk about my financials. The person handling your books is a key partner in making your business a success. However not making the time to review what money is coming in and going out, you have no earthly idea on if you’re successful or not. Your employees could be committing fraud, you could be behind in getting your bills paid on time, you could not be collecting overdue invoices, and worse, potentially ruining your credit in the process. All because you don’t make the time to understand your financials because you are too trusting and when it’s too late, you’ve potentially lost your livelihood.
Mistake #6 – I’ll stick with my green journal pad. It’s 2013 and people are still too cheap to spend a few hundred dollars on a software program that can give them all of the information that they need to help make their business successful. Yet, they’ll spend thousands of dollars on trying to bring in customers, new equipment, or salaries on themselves or employees. Where is a business owner’s common sense when they feel that the accounting part of their business is a financial black hole?
Mistake #7 – Why can’t I charge every expense off to my business? The definition of a business expense, is a transaction for which is necessary to help the operations of a business. This goes back to: Why do I need to know accounting to operate QuickBooks? What do taxes have to do with QuickBooks? Every decision you make financially that goes on that tax form, needs to be justified and defended if it ever gets called into question. If running a business was easy, then everyone would be doing it.
Dwayne Briscoe, Founder & Owner, Bookkeeping-Results LLC, 888-692-2083, www.bookkeeping-results.com. Steven Kay, Talk Show Host & Producer / Media Buyer & Consultant, Steven Kay Media LLC, 713-STEVEN-K (713-783-8365), me@StevenKayLive.com, www.StevenKayLive.com.