Are accounting and bookkeeping mistakes draining your business startup potential? If yes, then you need a complete guide on how to avoid Business Startup Accounting and Bookkeeping Services mistakes in 2024.
A successful strategy for outsourcing accounting and bookkeeping services for small business enables your small business to reach new heights. When a business follows the right steps in accounting, it can avoid big mistakes.
Don’t allow mistakes to become a hurdle in the way of your financial growth. Keep reading until you get your answer!
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Toggle4 Common mistakes to avoid in business startup accounting and bookkeeping services
It’s not easy to choose accounting and bookkeeping services. You need a complete understanding of: How to hire a bookkeeper service provider if you don’t want to make any mistake.
Starting a new business is not so difficult but keeping it growing is something challenging for you. If you want desirable results, you must have to consider the following prevention tips. So let’s dive in!
1: Failing to hire an experienced service provider
Hiring a right bookkeeping and accounting service provider can save you from making costly mistakes.
Although most business owners aren’t qualified to handle finances, even experienced accountants and bookkeepers occasionally make mistakes.
So, you need to opt for services from a perfect match.
Without the right financial expert, you may end up making mistakes in tracking expenses, paying vendors, balancing accounts & handling payrolls.
Ignoring expert assistance can save you money, but a few mistakes in these areas might cost you more.
Here are some methods to seek financial help:
- They handle the financial records of your company with trustworthy software.
- Also, they are licensed by the National Association of Certified Public Bookkeepers.
- CPAs can identify patterns, aid with tax planning & uncover errors before they become more serious issues.
- If hiring a full-time employee is out of your price range, think about hiring a remote-accessible freelance bookkeeper or accountant.
- Connecting with knowledgeable experts is simple due to a variety of platforms.
2: Inaccurately tracking business expenses
Your bookkeeping and accounting may become far less efficient if you fail to maintain accurate records.
Your company may lose money as a result. you may find the problem of missing important bills.
You’ll have a lot of difficulties during tax season. Inaccurate tracking can be impacted on your tax preparation and tax planning, which will result in serious legal issues.
You can follow the given measures if you want to avoid inaccurate tracking mistakes;
- To evaluate your company’s financial health, you need a system that monitors every transaction, whether you use a spreadsheet or hire a bookkeeper.
- Accounting software makes the work of financial professionals easier, even though they can still be of assistance.
- All of your financial transactions are tracked by this program, including bills paid, money deposited or withdrew & invoices sent.
3: Combining personal & business financial accounts
Particularly in their early years, small business entrepreneurs frequently combine their personal and professional money.
Let’s take an example, you may visit Costco or Walmart to get business supplies & wind up purchasing a few domestic products in addition.
However, if you don’t have a separate company bank account, combining your personal and professional spending might result in a number of problems.
It’s time to separate your personal and company accounts if you’ve been doing so. Open a separate bank account for business use; your bank may provide incentives for doing so.
To make it easier to maintain your company costs and receipts, always keep your personal and business purchases apart when you shop.
It would be easy for you to manage your accounts and bookkeeping tasks.
Using a single account for all transactions might lead to issues like:
- Having trouble telling the difference between personal and professional dealings
- Difficulties in filing taxes
- Tax deduction opportunities lost
- Difficulties in Obtaining a Business Loan
4: Not Organizing Employees Properly
Many small businesses depend on employees or freelancers to get important work done. It’s essential to classify these workers correctly, as mistakes can lead to lawsuits and tax penalties.
If a business owner misclassified an employee, the government misses out on payroll taxes.
The U.S. Department of Labor warns that penalties can be significant:
Business owners may have to pay payroll, Social Security, unemployment, and Medicare taxes for misclassified employees.
The business can also face penalties and lawsuits if employees don’t receive proper benefits under the Fair Labor Standards Act.
Now you can see how this mistake led you towards serious legal consequences.
To avoid misclassification, determine if a worker is an employee or a contractor. ?
Think about their link to your firm, their working conditions, and their compensation.
If someone works eight hours a day, five days a week, they probably work full-time. They are paid a wage and are covered by health insurance.
Someone is most likely a contractor if they are paid on a project-by-project basis and do not get benefits.
After the employee has been classified, make sure they complete the appropriate payroll form (a W-4 form for employees, a W-9 form for contractors).
If you can demonstrate that you have a legitimate rationale for your categorisation, the IRS may provide you relief if you make a mistake.
In other words, you can demonstrate any of the following:
- To determine your categorisation, you relied on an IRS decision or a court judgement pertaining to taxes.
- When the IRS examined your company, you did not reclassify these employees; instead, you treated them like independent contractors.
- You are able to substantiate that workers in your industry are classified in a comparable manner.
- You took action based on guidance from an accountant or attorney who is familiar with your company.
Last words:
Avoiding frequent errors in business startup accounting and bookkeeping services is important for your company’s financial health and success. You may avoid costly blunders that could affect your success by employing qualified bookkeeping experts.
They will help you by keeping accurate records of your spending, keeping separate accounts for your personal and company needs. Remember that building a solid accounting foundation will lead to success in the future.
Give Goldmine Tax’ bookkeeping and accounting services a chance to make sure your company stays out of these traps.
Our certified accountants & bookkeepers are here to assist you in streamlining your financial procedures and maintaining the profitability of your company!