1. Having limited knowledge of how bookkeeping works

Handling the books yourself without sufficient knowledge or experience can directly impact your business’s health and performance. You may be familiar with the basics of the process, but that doesn’t mean that you’re ready to handle such delicate procedures without assistance. There are many potential pitfalls that might cost you money and stress, and you might miss them without a professional to lead you through the minefield. Cooperating with a professional is one of the best ways to invest in your company and secure your future. They will take excellent care of your books, including by reviewing them periodically to ensure that your financial statements and other information are correct. 

2. Not setting up a business bank account

One huge mistake among business owners is mixing professional finances with personal ones. A blurry line between business and personal accounts and credit cards needlessly complicates bookkeeping for startups; even worse, you might be held personally liable in a legal dispute if it can be proven that you use your accounts interchangeably. Instead of leaving yourself exposed, we recommend that you create a separate bank account for the exclusive use of your business, as well as a dedicated credit card for company use. This way, you always know where your bank statements belong and will be able track your professional finances with ease.

3. Not Setting up the Chart of Accounts Correctly

Helpful accounting software exists to assist with all the number crunching and data management, including options ideally suited to simply bookkeeping for startups. The software is convenient, but there are some notable caveats that you should know before trusting it blindly. For example, most applications will use a default list of accounts to begin your books. This list will be long and confusing; therefore, we suggest that you do not use these defaults. Instead, it is much better for your business and future to enlist the help of a tax specialist or accountant who will establish your books using only the types of accounts that are appropriate for your business’s needs.

4. Not Reconciling the Books on a Regular Basis

We all procrastinate occasionally. It is tempting to put off data entry, but this will only result in more stress. You can make costly mistakes when rushing to catch up with accounting entries. Instead of stressing as tax time nears, we suggest that you manage your records in a deliberate and timely way; this involves saving and organizing credit card information, invoices, and bank statements on an ongoing and consistent basis. Don’t wait until tax time to update your entries! Protect your bottom line by filing and maintaining reliable records.

5. Not Reconciling Transactions Properly

Accounting software can simplify and rationalize reconciling your books. While useful, these are not fool-proof tools. Every single bank transaction must be tracked to verify that the date and amount of each transaction matches bank records. Since bank statements do not always come through correctly, it is wise to look to verify that everything aligns, and the business bank accounts is reconciled to the books. This ought to be a monthly maintenance task. The credit card statements must be reconciled also. It is common for credit card fraud to fall under the radar, so close management is especially important if your company uses a shared credit card. Reconciling can uncover any errors that are worth a second look.

6. Not Thinking about the Tax Preparation

Bookkeeping for startups is about more than just record keeping. It is essential to taxation. Financial statements are the basis of your tax return, and you’ll only be doing your business a disservice by taking short cuts while completing the necessary bookkeeping task required by your business. Don’t run the risk of a stressful tax filing (and a litany of other problems!). Protect your business and your bottom line by ensuring that your bank statements, credit cards, and other statements are carefully tracked and reconciled. Make sure your business is set up for success at tax time and get the deduction you deserve.

7. Not Backing up Your Data

Tech problems are inevitable. Unfortunately, many companies leave themselves vulnerable by failing to back up their data regularly. When (not if) their system crashes, they are at risk of losing all their bank statements, invoices, credit card information, and other financial statements. It is incredibly important to protect your data by backing everything up to an external hard drive or the cloud. A backup system safeguards your precious accounting records and protects your access to your financial statements, so you’ll be able to track your numbers no matter the situation.

8. Failure to Hire an Experienced Bookkeeper

Bookkeeping for startups requires a lot of concentration, calculation, and time. As your company matures, it will encounter more transactions that you will need to oversee. As scale increases, it only becomes more difficult to keep a handle on your information and books. If you balance your own books, you will have to devote a significant amount of your time sorting through payroll, reconciling books, or tracking endless bank statements. You’d probably rather spend that time working on your business and growing your operations. So, don’t struggle through this process yourself, and delegate to an expert instead! Outsourcing to a trained bookkeeper is a far more timely and cost-efficient option, empowering you to return to work on operations and growing your business; moreover, you will protect yourself from mistakes that experienced bookkeepers know how to avoid. Expert guidance will safeguard you from unwanted expenses and penalties, as well as any missed opportunities to save money.