Small Business Bookkeeping Nightmares & How to Avoid Them

By Lawrence Levinson, Director, Wave Advisors at Wave.

Spiders. Snakes. Heights. These are common fears for the average person, but for small business owners? One of the spookiest (and most intimidating) experiences for them can be bookkeeping. Most small business owners begin their venture because they have a passion or craft they want to share with others. They got into business to focus on their passion — not to deal with the headaches and stress that can often come with managing the financial side of their business.

Fortunately for small business owners, the one thing in common between all of them is that they are avoidable with the right approach. Staying mindful of a few essential best practices will help your small business weather any storm and reach entrepreneurial longevity.

Let’s explore some of these common bookkeeping frights and how business owners can avoid them.

Mixing Business and Personal Spending in one Account

This is far and above the most common mistake we see small business owners make – especially as work and life blend more than ever before.

While purchasing a couple of items at a supply store on your personal credit card here and there may seem innocuous, having to comb through your banking statements to find and categorize those expenses with a tax deadline looming over you can be a major headache. In fact, our team once spent over a week helping one customer reconcile their business expenses for an entire year across not one, not two, but three different personal checking accounts, along with their business accounts.

Opening a small business bank account might seem intimidating, especially if you’re a new or first-time business owner, but there are no-fee business bank accounts that sync banking with bookkeeping, like Wave Money– reconciling transactions as a business owner spends on the card. It’s a great option for those looking for an easy solution to separating their personal finances from their business expenses.

Storing a Shoebox Full of Receipts

An old school word processor document or spreadsheet is one thing – but we’ve had dozens of small business owners come to us admitting they are using an actual shoebox as their main source of receipt and invoice copy storage. In one case, we spoke to a panicked small business owner whose husband had accidentally thrown out almost an entire year’s worth of receipts, with only the ones at the bottom of her purse left to reconcile.

Unfortunately for this customer and other shoebox small business owners before her, relying on, and eventually misplacing, physical copies of business documentation results not only in missed deductions come tax season, but also a significant lack of visibility into cash flow. Having a clear view of money coming in and money going out is key to a business owner’s financial health. It can help them determine when their income tends to fluctuate, their high and low seasons, the best time to consider hiring extra help, or to invest in a major piece of equipment.

Modern, smart and automated bookkeeping software can keep expenses organized and give you the power to make smart investment decisions with a better understanding of how much money is flowing in and out of your business.

Not Hiring a Professional for the Job

One way to avoid some of your bookkeeping headaches is to outsource the task altogether. That said, all too often, small business owners turn to friends or family in their network that may claim to be experts at managing their own accounting. But ultimately, they lack a firm grasp on bookkeeping basics as well as the experience to understand how business owners’ needs might differ depending on the type of business they run, their size and the industry they’re in. In these cases, ‘free’ help can often prove to be far more costly in the end.

Taking the time to vet a bookkeeping advisor with relevant expertise specialized to your goals and needs is money well spent.

Administration and bookkeeping are a pain point for many small business owners, but today’s digital bookkeeping and banking solutions can save business owners countless hours and headaches. These solutions are designed to save business owners time, help them take control of their finances and develop the confidence to make informed business decisions, such as whether to expand their customer base, invest in marketing or even hire their first employee. Coaching from qualified experts can help take these business owners to the next level of growth and give them the freedom to pursue their passions undistracted.

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Lawrence Levinson is the Director, Wave Advisors at Wave. His team offers tailored, one to one accounting and bookkeeping services for small business owners that complement Wave’s digital offerings.