Bookkeeping may not be your favorite part of being a business owner, but it’s vitally important to your financial stability and success. Learning how to accurately track and balance your accounts will result in fewer mistakes and less stress. Making the bank balance and your book balance match can seem like an impossible goal, but by avoiding a few common errors it is possible. If you’re a new business owner – or you’re looking for a refresher – here are three common bookkeeping mistakes I see and solutions on how to avoid them:
1. Forgetting about outstanding checks or deposits in transit
Outstanding checks are any checks that have not yet cleared your bank account. If you’re reconciling against the mailed statement, keep in mind that some checks may not have cleared in time to be included on the statement. Similarly, deposits in transit are account credits that are deposited too late in the day to be included with your statement.
2. Not taking bank fees into account
Another common oversight is adding bank fees to your books. Many banks charge fees of various sorts on business accounts. Brush up on your financial institution’s fee structure so you can expect fees and also avoid them in the first place when possible.
3. Making transposition errors
This is an easy enough mistake for anyone to make. Say that new printer cost $115, but you accidentally enter it as $151. These errors can be tricky to catch as a quick visual scan is likely to miss them. Here’s a tip: if the difference between your bank balance and your book balance is divisible by 9, it’s probable this might be the cause.
4. Having the same people who write the checks balance the books
Accountability is important. For the sake of avoiding internal fraud and theft, separate the check-writing and account-balancing responsibilities and assign them to different people. Not only will this keep everyone honest, but having a second pair of eyes can also really reduce the amount of mistakes.
5. Not using QuickBooks
QuickBooks is my favorite accounting software for many reasons, but one of my favorite features is how streamlined it makes the account reconciliation process. If you’re not yet using QuickBooks, I highly recommend you look into it. If you don’t know how to do account reconciliation with QuickBooks, get in touch with me so I can show you how!
Keeping your books straight is important. I recommend reconciling your accounts at least once a month. You’ll be more likely to catch unauthorized transactions quicker, notice errors before they affect more of your bookkeeping, and be aware of what your cash flow looks like. However, bookkeeping and accounting for your business may not be your area of expertise. If you need bookkeeping support for your business, contact me today so we can talk about how I can help you.