When you establish a small business, you need to make sure you have all of your finances in order. Failing to pay enough attention to your finances can leave you in hot water with the IRS and put your business at risk. Many small business owners continue to make the same financial blunders. However, if you are aware of these mistakes, you can take steps to avoid your business falling prey to them.
Financial Mistake #1: Failing to Duplicate Records
Your financial records are essential to keeping your business running smoothly. They allow you to keep track of your products and customer invoices. Your financial records allow you to ensure you keep track of your expenses, profits, payroll, and taxes. These documents are crucial to your business and should be backed up.
You should backup your financial records: at the end of every day, you update any information to your records if you don't update them on a daily basis. There are numerous ways that you can back-up your financial records. You can upload them to the cloud or you can back them up on a USB drive or use a backup hard drive.
You can also print out hard-copies of your financial records. It can be a good idea to create at least monthly hard-copy backups as well. That way, if your computer gets hacked or crashes or anything else happens, you always have access to your important financial records.
Financial Mistake #2: Failing to Verify Bank Account Activity
You should check the activity on your bank account on a daily basis and go over all the transactions and ensure they add-up on at least a weekly basis. This is a process called reconciling.
It is important to do this on a weekly basis, so if you see anything irregular, you can take action to fix whatever the underlying issue is.
Financial Mistake #3: Failing to Handle Payments Correctly
Finally, you need to make sure you handle your payments properly. When you get a payment, you need to mark down the date the invoice was paid. Next, you need to make sure you document that the account receivables were paid. After you mark down that the payment has been paid, then deposit the money into your bank account if it is a cash or check transaction.
It is important to know which clients paid their bills and when they paid their bills. This will allow you to go after clients who have not paid their invoices. Completing all of your paperwork when invoices are paid will help you keep your records straight.
Be sure to be vigilant about backing up your financial records, reconciling your bank accounts, and tracking all paid invoices.Share