Small Business Owners 

In today's uncertain economy following the worldwide COVID-19 pandemic, small business owners need all the help they can get. Especially since the odds are already against survival itself! Current statistics state that about 20% of all small businesses fail within the first year, about 50% or half of what's left fails within the next 5 years, and only about a third or 30-35% are left at the end of 10 years. 

If you've managed to struggle through your first year, terrific job! This means you have promise. However, it also means you only have a short window of crucial time to incorporate things like scalability, for growth opportunities and potential overall level of success. So stick with us, as we discuss in this post some of the most common bookkeeping mistakes to avoid. 

#1- Hire A Professional 

Seems obvious, doesn't it? [It is.] 

If you're experiencing any type of money struggles that affect your business's overall financial health, you need to hire a competent and experienced professional bookkeeper/accountant. Many small business owners make the mistake of trying to use accounting software and do it themselves, often just bookkeeping on an as-needed basis. Most small business owners pay for their terrible record-keeping system if they even survive. 

Even if you aren't doing that much business yet, or don't see the need for an organized and effective bookkeeping system, these accounting skills are necessary for better cash flow management , and the ability to take advantage of opportunities for growth and success. This is one of the most common and detrimental mistakes you can make, as a new business. A professional accountant or financial manager is critical to meeting your business bookkeeping needs.   

#2- Separating Business Expenses from Personal Expenses 

One of the common bookkeeping mistakes most small business owners make, initially, is mixing business and personal finances. As a new business owner, you must immediately adopt a new, strict discipline involving the complete separation of personal and business accounts.

Your personal income tax return is technically combined with your business tax return now, but the business records must be impeccable. And if you don't begin to totally separate your personal expenses from your company's finances now, it will cause you major problems with the IRS in the future. 

Hopefully, you already have your business and personal lives in separate bank accounts. You will need to get in the habit of keeping receipts for absolutely everything, so you're not caught unprepared at tax time with eligible write-offs. Keeping your business accounts and financial records organized and categorized will be vital to many different areas of your business. 

Your bookkeeping records and financial statements will be key factors in determining the potential for growth and success your business achieves. You can avoid making bookkeeping errors like these by opening multiple accounts for separating business from personal funds and keeping proper records, including bank statements for each of them.  

Business Taxes - Deductions and Sales Tax

#3- Save Receipts For Legitimate Tax Deductions 

The next common mistake we're going to talk about avoiding has to do with your taxes. As aforementioned, keeping vigilant records and saving your receipts for everything , including personal stuff, is of paramount importance for more than one purpose. Having a physical paper trail, including written records when appropriate, to back up your electronic records and transactions is no longer optional. This point cannot be overstated. 

A tax deduction for small businesses could include small expenses like office supplies. If you use a vehicle for business-related activities, the IRS has a certain amount of mileage that you can deduct. A good accountant, incidentally, takes care of your tax planning and preparation for you, as well as keeping all your receipts and financial records for taxes, business growth opportunities, and investment purposes. 

#4- Sales Taxes and Payroll Taxes

Collecting and reporting sales tax is something many small businesses forget, and neglecting sales tax will cause you major problems. Every state has a different amount and its own laws so be sure to check with yours. In addition, if you have employees, you will need to pay payroll taxes quarterly. These are two important things you don't want to overlook. Your bookkeeper or accountant will know specifics on tax laws for your state, as well, and should be able to take care of your business tax preparation for you. 

Make sure you're classifying employees correctly, as there are different tax treatments depending on how your business is structured. Independent contractors are not employees, so the wages you pay them are usually deductible. Your business should be properly classified as well, into the correct tax treatment best suited for overall scalability and growth potential. It is very important to structure your business in the right tax treatment or category best suited for your expectations. 

#5- Reimbursable Expenses 

Track reimbursable expenses. Reimbursable expenses are costs you incur in the course of running your business, such as traveling or taking a client (or potential client) to lunch. These kinds of expenses are represented as a cost to the company, but you reclaim this money as personal income later.

So if you're using money out of your own pocket for anything business-related, as long as you're keeping records that track these costs, you can accurately reimburse yourself when you need to. Incorrect data entry of these details is another mistake to avoid, incidentally. Reimbursement also works both ways, so if you use money from petty cash for something personal or otherwise, be sure you replace it. Your bookkeeper will thank you! 

Boyd Group Services 

Here's the bottom line: if you have been operating without a bookkeeper/accountant, trying to handle your books yourself - even if you're good at it - in case you haven't noticed, running a business takes a LOT of work! 

*HINT: You should try to avoid adding yet another entire job description to your overfilled plate. Boyd Group Services has all the professional help you need, to grow your business and achieve optimum financial success.  

So if you need the name of a top-notch professional accountant for your business's financial management, Boyd Group Services has founder Chad Davidson , who offers all levels and types of financial services for businesses, including: 

• CPA (Certified Public Accountant) and Bookkeeping Services
• Business Strategic Tax Planning 
• Tax Preparation 
• CFO (Chief Financial Officer) Services 
• Financial Advisor 

Chad has a proven method for success and has helped all kinds of businesses in multiple different industries achieve long-term success. His integrity and expertise are unmatched, and his professional financial skills and extensive experience can help guide your business to reaching its full potential. Schedule a free consultation and diagnosis of your business today, to see all the amazing ways Boyd Group Services can help you, too!