How can I catch any bookkeeping errors I make when I’m doing it myself?
You’ve decided to take on your own bookkeeping. Maybe it’s to help you stay on top of your numbers or because you’re still deciding what outsourced finance solutions are right for your business. Whatever the reason, daily bookkeeping is no easy task. Small bookeeping errors today can snowball into bigger problems come tax time or year-end, so it’s important you stay as vigilant as possible.
Here are some of the most common errors we see in our clients’ books for you to keep an eye out for:
Unreconciled Accounts
Reconciling your accounts means ensuring two different sets of records are in agreement with each other, like your bank and credit card accounts. It helps ensure the accuracy of your account balances and that all your transactions are categorized correctly.
We recommend you reconcile your bank and credit card accounts at the end of each month. Leaving it until your years-end means more work for your accountant and more money you’ll need to spend fixing past mistakes.
Unreconciled Transactions
Your work isn’t over just because you’ve achieved a zero-dollar difference between accounts. Unreconciled transactions are transactions that haven’t been cleared out or “checked off” during the reconciliation process. Some common unreconciled transactions we see are:
- Credit card transactions that haven’t yet been processed
- Cheques you sent to a vendor that haven’t been cashed
- Deposits that weren’t taken to the bank until after the end of the month
Unreconciled transactions still influence your company’s financials and must be cleared out by your accountant before they file your accounts. To help cut down on the time and costs this takes, you can ensure any old, unreconciled transactions have been cleared from the reconciliation window before you hand your books over.
Uncategorized Assets, Income, or Expenses
If you enter a transaction without categorizing it, your accounting software won’t always know what to do with it. It may default it to a “filler” account or somewhere else the transaction doesn’t belong. You can catch mistakes like this by regularly reviewing your Trial Balance or Profit and Loss Reports and reclassifying any transactions that are defaulted to the wrong account.
Misclassified Transactions
Similar to uncategorized transactions, misclassified transactions are transactions that have been categorized to the wrong account. These aren’t just costly and time-consuming to fix for your accountant, but they could also alter your books enough that you’re making decisions based on inaccurate information.
Make sure items are being recorded accurately at entry and regularly review your accounts to reduce your chance of misclassifications.
Outsourcing your bookkeeping can save you time and money
Doing your own bookkeeping is time-consuming and stressful even in the early days of your business. As you begin to scale and your transaction volume increases, it only becomes more difficult. Plus, even if you’re putting in all the hours, there’s no guarantee you won’t still make mistakes that lead to pricey year-end clean-up by your accountant.
The average business owner can save ten hours a month by outsourcing their bookkeeping. What would you do with those ten extra hours? Your time is valuable. Spend it doing what you do best. Get in touch to learn how Titanium can help you reduce errors, save money, and go further.