Accounting is no small feat. It is one of the most important aspects of any business and should be considered as a mainstay if you are planning to put up a company.
That being said, bookkeeping is an act that is prone to mistakes and those mistakes can be quite costly as well.
Today, I am going to talk about some of the deadly sins of bookkeeping so that you will be aware and so that your bookkeeper will not do them.
Also, if you want to make sure that you are hiring the most competent bookkeepers out there, I highly recommend that you take a look into bookkeeping services in Malaysia.
So, without further ado, let’s get started!
Not Logging Major Purchases Accurately
There are tax deductions that can be hand if only the business owner takes into account the exact amount of money that is being spent on certain company expenses.
The tax deduction that the business owner is entitled to depend upon the business overhead purchases and the total lifespan of the merchandise or the equipment that was purchased.
For example, if you were to look at ink cartridges and printer paper, they typically do not have a long life since people can just use them readily. Therefore, they are considered to be part of the “Office Supplies” entry in your accounting books.
However, things start to change whenever you make major equipment purchases such as office computers, copy machines, and others. Because of their longer lifespan, they are deemed to be part of the company’s “Long-term assets”.
The value of your major purchases can depreciate over time, so long as that particular merchandise is still useful.
Not Keeping Track of All Purchase Receipts
Business or purchase receipts are quite useful for accounting purposes, yet there are business owners who are not keen on keeping all of them.
Sure, they keep receipts for major purchases, but what about smaller transactions? These are still needed as it can help support your claim for tax write-offs to the Internal Revenue Service.
If you do not have a receipt, the company will not be able to get their claim on its tax return.
To ensure that the receipts will not get lost, scan them and save them in a computer. Also, it would be great if you could keep it under lock and key for safekeeping.
Mixing Personal and Business Finances
Even though it is convenient to mix personal and business finances when you are still starting out- it is important that you do not do so.
Because you are going to purchase a lot using your business account, intermingling it with your personal account could cause issues regarding inaccurate information. This might lead to an audit by your country’s IRS and could be detrimental to your company’s finances.
Inaccurate Financial Reports
If your bookkeeper or accountant doesn’t record your assets in a more accurate manner, then this will result in inaccuracies and erroneous entries in your financial reports.
The bookkeeper or accountants should be knowledgeable enough about the accounting process to ensure that every bit of detail is as precise as it can be.
Allowing Multiple Administrative Access to Accounts
Although it might be okay to share your accounts to a different accounting firm, it is best that you create multiple accounts. Each account should have a separate username and password to ensure that not all these accounts can have access to all of your company’s important financial information.