Are you a business owner in the Philippines? Are you new to bookkeeping? If so, you’re in for a treat. In this blog post, we’ll be discussing 15 of the most common bookkeeping mistakes made by Filipino business owners- and how to avoid them. So whether you’re just starting or doing bookkeeping for years, this post is for you. Stay tuned!
Top 15 Common Bookkeeping Mistakes!
1. Not Knowing What Bookkeeping Is
The first and most common bookkeeping mistakes make is not knowing what bookkeeping is. Many business owners believe that bookkeeping is simply keeping track of their finances when it is so much more in reality.
It encompasses everything from recording and categorizing transactions to preparing financial statements to filing taxes. In short, bookkeeping is the backbone of any sound accounting system.
Without accurate and up-to-date bookkeeping records, businesses would be in complete chaos. Fortunately, plenty of resources are available to help business owners learn the ins and outs of bookkeeping (including this blog post!).
2. Not Keeping Accurate Records
One of the essential aspects of bookkeeping is keeping accurate records. It seems like a no-brainer, but you’d be surprised how many businesses don’t do it.
There are many reasons why inaccurate bookkeeping records can be harmful to a business:
- Makes it difficult to track expenses and income, leading to poor decision-making.
- Create problems come tax time.
- Give creditors and lenders a false impression of the financial health of your business.
Bottom line: Accuracy is vital when it comes to bookkeeping!
3. Not Staying Organized
Another common bookkeeping mistake is not staying organized. This is particularly true for businesses that are just starting and don’t have a system to track bookkeeping records.
It records can quickly become overwhelming and challenging to manage without a system. This can lead to errors and omissions, which, as we just discussed, can be harmful to your business.
The good news is that there are plenty of bookkeeping software programs available that can help you stay organized.
4. Not Updating Records Regularly
Another mistake businesses make is not updating their bookkeeping records regularly. This seems like it would be easy to do, but it’s often overlooked in the day-to-day grind of running a business.
The problem with not updating bookkeeping records regularly is that it can create issues down the road. For example, if you’re trying to apply for a loan and your bookkeeping records are outdated, the lender won’t have an accurate picture of your business’s financial health.
To avoid this common bookkeeping mistakes, set aside time each week or month to update your bookkeeping records.
5. Not Categorizing Transactions Properly
One of essential aspects of bookkeeping is categorizing transactions correctly. This helps businesses keep track of their expenses and income, crucial for making sound financial decisions.
However, many businesses don’t take the time to categorize their transactions properly. This often leads to bookkeeping records that are a mess and difficult to decipher. If you find yourself in this situation, take some time to go back and categorize your transactions properly. It will save you a lot of headaches down the road.
6. Not Reconciling Accounts Regularly
Another bookkeeping mistake businesses make is not reconciling their accounts regularly. This process, which compares your bookkeeping records to your bank statements, helps ensure that your bookkeeping records are accurate and up-to-date.
Not reconciling your accounts can lead to many problems, including overstating or understating your income and expenses. This, in turn, can lead to poor decision-making and issues come tax time.
Reconcile your accounts at least once a month to avoid this bookkeeping mistake.
7. Not Keeping Business and Personal Finances Separate
One of the biggest bookkeeping mistakes businesses make is commingling their business and personal finances. This might not seem like a big deal, but it can have serious consequences.
It can make it difficult for starters to track business expenses and income, which is crucial for making sound financial decisions. Additionally, it can create problems come tax time and make it more challenging to get approved for loans and lines of credit.
To avoid this bookkeeping mistake, make sure to keep your business and personal finances separate.
8. Not Tracking Inventory
If you’re in the business of selling products, it’s essential to track your inventory levels. This will help you ensure that you have enough products to meet customer demand and avoid stockouts.
Not tracking inventory can lead to many problems, including lost sales and frustrated customers. Additionally, it can make it challenging to manage your expenses since you won’t know how much product you need to purchase.
To avoid this bookkeeping mistake, put a system to track your inventory levels and update them regularly.
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9. Not Keeping Receipts and Documentation
Businesses make another bookkeeping mistake of not keeping receipts and documentation for their expenses. This might not seem like a big deal, but it can come back to bite you later on.
For example, if you’re audited by the IRS and don’t have receipts or documentation for your business expenses, you could owe a significant amount of money.
To avoid this bookkeeping mistake, keep all receipts and documentation for your business expenses in a safe place. Additionally, consider using bookkeeping software to track your expenses electronically.
10. Not Hiring a Professional Bookkeeper
Many businesses try to save money by handling their bookkeeping tasks themselves. However, this is often a mistake.
Bookkeeping is a complex and time-consuming process, and most business owners don’t have the skills or knowledge necessary to do it properly. This often leads to bookkeeping mistakes that can cost businesses a lot of money in the long run.
Consider hiring a professional bookkeeper to handle your bookkeeping tasks to avoid this mistake. While this will require an upfront investment, it will pay off in the long run by helping you avoid costly bookkeeping mistakes.
11. Not Staying Up-to-Date on Bookkeeping Changes
The bookkeeping landscape is constantly changing, and it’s crucial to stay up-to-date on the latest bookkeeping changes. This includes changes in bookkeeping software, regulations, and bookkeeping best practices.
Not staying up-to-date on bookkeeping changes can lead to many problems, including using outdated methods and missing out on new bookkeeping opportunities.
To avoid this bookkeeping mistake, stay up-to-date on the latest bookkeeping changes. You can read bookkeeping news and information online or attend bookkeeping seminars and workshops.
12. Not Backing Up Your Bookkeeping Records
Another bookkeeping mistake businesses make is not backing up their bookkeeping records. This might not seem like a big deal, but it can have serious consequences.
For example, if your bookkeeping records are lost or destroyed, you could be left with a significant financial burden. Additionally, if you’re audited by the IRS and don’t have backups of your bookkeeping records, you could owe a considerable amount.
To avoid this bookkeeping mistake, make sure to back up your bookkeeping records regularly. You can do this electronically or by making physical copies of your documents.
13. Not Understanding Bookkeeping Terms
One bookkeeping mistake that businesses make is not understanding bookkeeping terms. This might not seem like a big deal, but it can lead to severe problems.
For example, if you don’t understand bookkeeping terms, you could use the wrong bookkeeping methods. Additionally, you could also misunderstand bookkeeping reports, leading to poor business decisions.
To avoid this bookkeeping mistake, learn the meaning of standard bookkeeping terms. You can find a list of common bookkeeping terms online or in bookkeeping textbooks.
14. Not Updating Your Bookkeeping Software
Another bookkeeping mistake businesses make is not updating their bookkeeping software. This might not seem like a big deal, but it can lead to severe problems.
For example, if you’re using an outdated bookkeeping software program, you could be missing out on essential bookkeeping features and functionality. Additionally, you could also be at risk of security breaches if your bookkeeping software is not up-to-date.
To avoid this common bookkeeping mistakes, update your bookkeeping software regularly. You can usually do this automatically by setting your bookkeeping software to update itself automatically.
15. Not Keeping Track of Bookkeeping Deadlines
One final common bookkeeping mistakes businesses make is not keeping track of bookkeeping deadlines. This might not seem like a big deal, but it can have serious consequences.
For example, if you miss a bookkeeping deadline, you could be subject to late fees or interest charges. You could also lose vital bookkeeping records if you don’t keep track of bookkeeping deadlines.
To avoid this bookkeeping mistake, keep track of bookkeeping deadlines. You can do this by setting up reminders in your bookkeeping software or using a physical bookkeeping calendar.
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As a business owner in the Philippines, it’s essential to be aware of the most common bookkeeping mistakes. By avoiding these mistakes, you can save yourself time, money, and hassle down the road. If you need help getting started or maintaining your books. Contact us today for a free consultation!