If you own a business, then you know first-hand how many hats you have to wear. From formulating ideas to managing expenses, you deal with a lot from day-to-day. As if that wasn’t enough pressure, you can’t afford to make a mistake on any level.
Do you currently do your own bookkeeping? If so, then you need to be aware of common bookkeeping errors that could bring down your business.
1. Transposition Mistakes
Transposition errors are very common. They happen when two or more digits get reversed as part of a larger sequence.
For example, a transaction amount of $4,334 might get put in the books as $3,434. As you can imagine that $1,000 difference is a big deal.
A tiny reversal error could completely throw off your books. It’s a type of unintentional error that could ruin your company.
You can find transposition errors by comparing your books to your bank statements. If you see a clear difference, then transposition could be the problem. The only way to avoid making these mistakes is to remain vigilant while doing your books.
We’re all fallible. If you find that you keep making transposition mistakes, it’s time to leave this task up to a professional. Consider looking into a bookkeeping service that you can trust.
2. Commission Errors
Commission errors are another common mistake that could spell disaster for your business. They happen when a correct amount is recorded in your account, but that amount’s value is wrong.
For example, an entry of $100 gets added to an account where it should’ve gotten subtracted.
Big commission errors can lead to an overestimation of profits. It could also lead to incorrect estimates of your losses.
About 82% of new businesses experience cash flow problems. Don’t let your business become a part of that statistic. Avoid commission errors by checking your credits and debits on a regular basis.
3. Error of Omission
Have you ever forgotten to add a payment to your income sheet? What about forgetting to deduct a business expense?
Both of these actions are errors of omission. These bookkeeping errors happen when you don’t include a transaction in your records. These accidents are very difficult to find after the fact.
It’s much easier to be proactive in preventing omissions by:
- Keeping receipts
- Having a system in place for entering every transaction
- Avoiding paying cash for expenses
You can also avoid errors of omission by hiring a professional bookkeeper. Your bookkeeper will have a system for ensuring no transaction goes unrecorded.
How to Avoid Bookkeeping Errors in the Future
Bookkeeping errors can happen to any business large or small. When these oversights happen, they cost your business time and money. You could even face penalties from the IRS or other organizations you report to.
Are you ready to move past bookkeeping errors and get a clean slate? The best way to avoid mistakes is to outsource your bookkeeping services.
Put your trust in the hands of our professionals at Books by Schmidt. Reach out to us now to learn more about the services we offer.