5 Reasons Why Bookkeeping is Important for Your Business

The startup culture has become quite popular. And when talking about startups, an “Entrepreneur” is the first person who comes to mind. When a new businessman enters the market, bookkeeping and accounting are crucial in the beginning to help him save money. But when a beginner performs this task, it is fairly common to make accounting mistakes as this is not a simple task.

As a result, some common accounting errors and corrections discussed below bring expert-like perfection.

Top 5 Common Accounting Errors you Should know about!

Accounting errors may be a significant hindrance in managing a company’s budget. To ensure the success of your business, it is essential to identify and prevent accounting errors. The ways to avoid some of the most common accounting errors and corrections are listed below.

 1. Lack in record-keeping

Record keeping is a hectic yet important task. It is one of the common types of errors in accounting. If you’re keeping records for the finances, you must ensure that you have all the records well-organized, including the receipts of transactions. If you are lenient in this, you will face great issues in taxation and audit.

How to avoid it?

To avoid accounting problems in business and prevent a lack of record keeping following must be done:

  • Have an accounting team or outsource your accounting and Bookkeeping
  • Digitalize your transaction records
  • Establish a proper capture, filing, and backup system

2. Poor tracking of expenses and balances

Initial stages of business establishment demand significant effort in all areas. Hence one of them is to keep track of expenses and balances, which new entrepreneurs usually ignore. This is the most common accounting mistake to avoid as it leads to fraud in business when handled by staff.

How to avoid it?

You must follow the below points to avoid errors:

  • Use of apps like Xero, Quickbook, mint, etc
  • Reviewing the transaction history regularly
  • Follow the division of labor in the finance sector

3. Avoiding  Bank Reconciliations

Maintaining a book record is necessary, but the accountant must also ensure syncing of the book records with the bank account if the balance statement for the bank account is ignored. If there is a mistake, your business could incur a substantial loss.                

How to avoid it?

Follow the below-mentioned steps to avoid bank reconciliations:

  • Keep comparing the bank balance and recorded sheets
  • Make it a habit to reconcile the bank statements and feeds.

4. Improper usage of accounting software

Accounting is made easier by introducing accounting software that has reduced manual work. It depends on you how you use it. The software works on form-based reports, so the data entries must be made carefully. You can hire accounting services in UK for your business. 

How to avoid it?

To avoid follow these steps:

  • Data entry is to be made carefully.
  • Use of software must be learned.

5. Showing a higher revenue

A major and frequent mistake is overestimating revenues, which can result in problems when you have to pay taxes because you will have to pay an extra amount. Additionally, if you find out how your firm is performing in terms of revenue, you could find the position of your business. 

How to avoid it?

Keep in mind the following ways to avoid the error:

  • Ensure proper workflows.
  • Before entering revenue, the bookkeeper must verify all entries made to open invoices.

Conclusion

Although these types of errors in accounting are quite common, there are ways to make corrections to them. Moreover, entrepreneurs can also prefer using some affordable London accounting services for their assistance.

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