Terrible Bookkeeping Advice (and what to do instead)
There's a lot of content and information floating out there on social media. Sometimes it's good advice, sometimes it's bad (or terribly horrifying) advice. So just for fun, today I'm gonna give you some examples of BAD bookkeeping advice.
π Ignore your Cash Flow
β Focusing only on profits without tracking cash flow can lead to financial trouble. Always monitor both. It's possible to be making sales and have a negative cash flow, and you would have no idea if you didn't keep track and regularly review your finances (or have a professional do it for you). This is something that I've seen a lot of people miss or neglect to pay attention to, so I made a free cashflow projection template for you!
π Mix Personal and Business Finances
β Keep separate accounts to avoid confusion and potential legal issues. This is like business/accounting 101 but needs to be said. Especially if you're a new business or just starting out, it can be easy or tempting to mix personal and business. But it makes your bookkeeping a nightmare and difficult to get an accurate picture of your business finances.
π Don't Keep your Receipts
β Failing to document expenses can lead to problems during tax season and missed deductions, not to mention an unclear picture of your finances! This is something that's really simple and easy to do, especially if you do it in the moment instead of having to comb back through months of transactions and finding all the receipts. My favorite way to keep track of receipts is in Google Drive, I have a blog post explaining my system for organizing receipts here.
π Don't worry about Regular Reconciliation
β Not reconciling accounts regularly can result in unnoticed errors or fraud...yikes. Reconciling is basically comparing your bank transactions and statements and verifying that the data/numbers match up. Sometimes you'll find discrepancies which is...obviously not good. You want an accurate picture of your finances and want to ensure that there's nothing off in your accounts.
π Just use a bookkeeping Software
β Without basic accounting knowledge, relying solely on software and not a professional can easily lead to things getting missed or mistakes and your books not being done properly. I can't tell you how many times I've gotten a new client and had to fix how things were done, even if they came from other *bookkeepers*, so imagine how messy it could be if you didn't really know anything about finances and tried to use a software yourself. When it comes to your bookkeeping and finances, especially if you want your business to last long term, it's always a good idea to bring in a professional.
π Ignore your Financial Statements
β Not reviewing your P&L and balance sheet regularly can prevent you from making informed business decisions. This is pretty self explanatory, but needs to be said. It's so important to regularly review your finances so you know exactly where you're at. Without that accurate info you have no idea if you're on track with your goals, what needs to change for you to hit those goals, etc. Whether it's a weekly or monthly checkin, make sure you're regularly reviewing your monthly statements.
π Skip getting Professional Help
β Avoiding professional bookkeeping or accounting services to save money can cost more in the long run. Especially if finances aren't your cup of tea and you're not keeping up with your bookkeeping. You could end up with a bill from the IRS if you're not paying estimated taxes but you're supposed to, you'll have to end up hiring a bookkeeper to do a 2-3 year clean up, etc. We have a whole series on what it looks like to work with a bookkeeper on our blog. Part 1: What it looks like to work with a bookkeeper. Part 2: When should I hire a bookkeeper? Part 3: What's the cost of monthly bookkeeping? and Part 4: Questions to ask when interviewing a bookkeeper.
I really can't stress this enough. Don't forget to take a look at your cash flow and review your P&L and balance sheet. Reconcile your accounts. Check and make sure you've got a record of your receipts so you can keep track of your expenses. Keep your personal expenses and purchases out of your business bank account! and of course, reach out and get help from a professional bookkeeper (hi, we're here for you ππΌ) if you need it! Having accurate books and financial records is absolutely essential in running a successful business. We're doing VIP Week clean ups all October so it's the perfect time to get your bookkeeping caught up, especially as you get ready to budget and make projections for 2025. Gotta have accurate numbers in the present to plan for the future!
