Bookkeeping is a challenging task and one of the most important when it comes to managing your business. Even the slightest of errors could seriously affect the financial stability of your business and its capability to sustain itself. This is why it is imperative that you learn from the mistakes of others and avoid them to ensure the success of your startup.
Here are a few mistakes to avoid that have been committed by a number of entrepreneurs and small business owners.
1. Hiring the Wrong People
One of the most common mistakes that many business people make is that they hire the wrong people for a particular job. You may not need to hire a person right at the start of the launching of your business, but you may need to do so later on when your business begins to expand. It can become very difficult for you to manage all aspects of the business.
Do not go for a cheaper hire, get a fully qualified person to look after your finances. You would be amazed at the number of things we have seen. Remember, garbage in, garbage out. You may have to pay more, but remember that you cannot afford losses that may result from mistakes or not understanding your financial position. Your business credit is an important element that could be at risk.
2. Spending Too Much on Technology
Many entrepreneurs invest a lot of money in really expensive accounting software. Some of the software that they purchase may not even be suitable for small businesses. It is best to do your research. If you opt for accounting software that has been designed for small businesses, such as the QuickBooks, Xero, Freshbooks or Wave. Their features vary greatly as do their costs and support. These are all good small business software programs, but QuickBooks has the ability to grow as you grow. It not only it comes with powerful features, it will not leave a dent on your wallet.
Remember, do an evaluation. No software is one size fits all. What works for a friend’s business, may not work for yours. There are a number of great comparisons on the web. Even with this, read carefully, and make sure you are picking what will work best for you. Also, do not hesitate to talk with a consultant, who can usually give you the best recommendation after talking with you about your business, but they may also be able to offer you special pricing.
3. Hiring Family Members
A lot of owners think that it is a good idea to hire their family members to look after the financial aspects of their business. This can be a dangerous thing, and in some cases, certainly not all, it can lead to conflict. Although many of us have heard or worked through some of the horror stories, not every story is bad. While this may be considered a generalization by some, I have seen enough of the bad to advise you to tread carefully. It will undoubtedly be a bit more expensive to hire a qualified bookkeeper or accounting professional to do the job, but you may avoid a number of problems and save yourself a bundle in the end.
4. Mixing Personal and Business Finances
Mixing personal and business finances has always been a bad idea. So many people have had to face numerous complications later on, but still, some businesses continue to use a single account for both types of finances. You really do not want $500 worth of video games on your business credit card statement. Not only will this cause confusion, but it could also spawn issues with the IRS.
5. Doing It All Alone
The do-it-yourself approach is not always practical, especially when it comes to starting up a business. A business requires a lot of attention, and there are so many facets that need to be carefully looked after during this critical phase. Things can really overwhelm you if you try to take care of everything on yourself.
It is best to get a helping hand in areas where you may need additional expertise, preferably a professional who can assist you with the most complex aspects of the business such as finance, accounting, taxes, business structure, etc.
It’s my hope that this information has been helpful. I realize some of these may be a duh for some of you, but now, you can’t say I didn’t tell you. 🙂