Top bookkeeping mistakes small businesses make and how to avoid them with NetSuite ERP Implementation

Bookkeeping is an essential task for small businesses, but it can also be a daunting one. Small business owners are often overwhelmed with the day-to-day operations of their business, leaving them little time to manage their finances. Unfortunately, this can lead to mistakes that can hurt their business in the long run. In this article, we'll explore the causes of bookkeeping errors and how to steer clear of them with a NetSuite ERP implementation and leverage the availability of an ERP consultant. 

1) Lack of Bookkeeping Knowledge: Small business owners who do not have a background in bookkeeping may make errors when tracking their finances. This can include mistakes in data entry or misunderstanding financial statements. 

 

2) Poor Record-Keeping: Accurate record-keeping is essential for good bookkeeping. Suppose small business owners need to keep track of their financial transactions. In that case, it can lead to errors and discrepancies in their records. 

 

3) Lack of Organization: Disorganization can lead to mistakes in bookkeeping. Small business owners who still need a system in place to track their income and expenses may need to remember to record transactions or misplace important documents. 

 

4) Not Separating Personal and Business Finances: Small business owners who mix their personal and business finances can make errors in bookkeeping. This can make tracking business expenses, preparing tax filings, and avoiding legal issues difficult. 

 

5) Inconsistent Tracking: Small business owners who do not consistently track their income and expenses may miss important transactions or forget to invoice customers. 

 

6) Not Reconciling Bank Accounts: Failing to reconcile bank accounts can lead to errors in bookkeeping. Small business owners who do not compare their bank statements with their records may miss or record transactions incorrectly. 

 

7) Lack of Attention to Detail: Small errors in bookkeeping can have significant consequences. Small business owners who ignore detail may make mistakes when entering data, preparing financial statements, or managing accounts receivable and payable. 

 

Bookkeeping mistakes can occur for various reasons, but common causes include lack of bookkeeping knowledge, poor record-keeping, lack of organization, not separating personal and business finances, inconsistent tracking, failure to reconcile bank accounts, and lack of attention to detail. Small business owners who prioritize accurate record-keeping, organization, and attention to detail can avoid these mistakes and make informed decisions about their business. Additionally, working with an ERP Consultant and understanding NetSuite pricing can help streamline the bookkeeping process and minimize errors. 

The most significant mistake small businesses make is failing to keep accurate records. Without accurate records, it's impossible to track income and expenses, which can lead to missed tax deductions, incorrect financial reports, and even legal issues. Small business owners should invest in a reliable bookkeeping system like NetSuite to avoid this mistake. It is an enterprise resource planning system that can help small businesses manage their finances more efficiently. With NetSuite ERP Implementation, small business owners can track income and expenses, generate financial reports, and manage inventory. 

Another common mistake small business owners need to correct is mixing personal and business finances. Small business owners should have separate bank accounts for their business and personal expenses. This will make tracking business expenses easier, make tax filings more accurate, and avoid legal issues. With NetSuite, small business owners can easily track their business and personal expenses separately. NetSuite ERP Implementation can also help small business owners manage their cash flow to avoid overspending.

Small expenses can increase quickly and should be noticed. For example, office supplies, parking fees, and meals with clients can all be tax-deductible expenses. Small business owners should track these expenses and keep receipts to make sure they can claim them on their taxes. With NetSuite ERP Implementation, small business owners can easily follow these small expenses and generate reports to ensure they don't miss any tax deductions. 

Another bookkeeping mistake small business owners make is failing to reconcile their bank accounts. Reconciliation compares bank statements with the company's records to ensure they match. This is important because it helps identify any document errors or discrepancies. With NetSuite, small business owners can reconcile their bank accounts and ensure their records are accurate. 

Small business owners often overlook accounts receivable and payable. This can lead to cash flow problems, missed payments, and even legal issues. With NetSuite ERP, small business owners can have complete visibility of their accounts receivable and payable and generate reports to help them manage their cash flow. A registered ERP consultant and their team can also help small business owners automate their accounts payable to pay their bills on time and avoid late fees.

 

Let's explore some bookkeeping tips and tricks to get you onboard for the upcoming quarters with the help of NetSuite ERP Implementation:

Starting with reliable financial data is crucial to achieving effective financial management. To achieve this, it is essential to practice good bookkeeping hygiene, which includes implementing simple tips or "bookkeeping hacks." These tips apply to businesses of all sizes and industries and can help save time and money while reducing frustration. 

 

1) Individualize personal and business transactions: This is necessary for all types of companies and legally required for LLCs, partnerships, and corporations. Separating personal and business expenses also allows for a clear and accurate representation of a company's financial situation. To accomplish this, it is recommended to open a commercial bank account and use a corporate credit card for all business-related purchases. Setting up these services usually requires providing an employer identification number or social security number for sole proprietors. 

 

2) Invest in reliable accounting software: Acquiring accounting software is essential for businesses of any size and for bookkeepers with varying levels of expertise. Basic accounting software is useful for keeping financial data organized and ensuring that accounts are balanced. This type of software may also include limited automation features, such as the ability to connect with bank and credit card accounts or generate journal entries from digital receipts using OCR. These added features can reduce the time spent on manual data entry.  

 

3) Regular reconciliations: It is essential for identifying bookkeeping errors and omissions. Reconciliation basically compares two sets of financial records to ensure it matches accurately. There are different types of reconciliations, including bank reconciliation, which compares cash balances and bank statement details with recorded transactions in your accounting system, and accounts-receivable reconciliation, which involves comparing customer payments to open invoices. Reconciling more frequently, such as on a weekly basis, means there are fewer transactions to review at any given time, making the process less burdensome and time-consuming. Regular reconciliation also enables the detection and correction of potential issues sooner. Therefore, it is recommended to aim for weekly reconciliations for critical accounts. 

 

4) Digitization is vital: There are two recommended hacks to avoid being overwhelmed by stacks of paper and disorganized receipts. Firstly, opt for digital payment methods whenever possible to capture every transaction and automatically transfer from linked business bank and credit card accounts to the accounting system. Secondly, scan paper receipts using a smartphone app or desktop scanner to keep them organized and prevent loss or physical damage. Losing receipts can prevent companies from deducting necessary expenses, resulting in artificially inflated operating income and higher taxes. Organizing and digitizing receipts saves time and money and provides additional benefits for tax preparers. 

 

5) Associating bank and credit card accounts: To improve bookkeeping efficiency, connecting business bank accounts and credit cards to the accounting software is advisable. This will enable the automatic transfer of transactions into the accounting system, minimizing the chances of manual data entry errors. Another way to enhance this hack is by configuring rules within the accounting system that will automatically assign bank and credit card transactions to the relevant general ledger account. Doing so eliminates the need for manual transaction entry, saving time and increasing efficiency. 

 

6) Leverage financial statements: Financial statements offer a concise overview of a company's financial state and can be produced using various accounting software. When utilized for financial analysis, they can identify areas of business that are thriving and those that need improvement. While lenders may only request them occasionally, it is advisable to generate financial statements regularly to ensure their relevance. Moreover, financial statements are valuable in developing budgets and projections. 

 

7) Automate: Automation helps to save valuable time, and one way to achieve this in bookkeeping is by connecting credit cards and bank accounts with an accounting system to enable automatic reconciliation. This is one of several bookkeeping hacks that can minimize the tedium, labor, and errors involved in manual data entry. Another useful technique is using optical character recognition (OCR) technology, which automatically converts text from physical documents, digital images, and PDF files into transactional accounting data. 

 

8) Expense categorization: Assigning the appropriate general ledger account code to transactions aids business leaders in comprehending a company's revenue sources, investment of capital, and financial ability to settle debts. Accurate coding is also imperative for auditing and tax purposes. The task of assigning the correct code is more straightforward when the transaction is still fresh in mind. Regular entry and categorizing of transactions also help prevent bookkeeping tasks from becoming excessively burdensome. The best scenario is when a significant portion of transactions can be automatically coded using pre-established rules. 

 

9) Track accounts receivable: To ensure a steady cash flow, it is crucial to keep an eye on accounts receivable and identify any past-due customer accounts that require prompt action. Taking timely collection measures can prevent the loss of revenue since the probability of recovering funds from delinquent accounts decreases with time. Another accounts-receivable tip is to immediately apply cash received from customers to their outstanding invoices, which can help avoid unpleasant collection calls that waste time and strain customer relationships. It is advisable to reconcile cash receipts and accounts receivable on a daily or weekly basis. 

 

10) Notetaking: A basic principle in bookkeeping is to document everything as soon as possible. It's important to take detailed notes during conversations with customers, suppliers, and bankers and to add comprehensive descriptions to invoices and checks at the time of creation to prevent common invoicing issues. Depending on memory is unreliable, particularly for business owners with multiple responsibilities. Keeping detailed records also helps other team members understand the business more quickly if they need to step in. 

 

11) Set attainable goals: Measurable goals that extend beyond the daily bookkeeping tasks, focusing on the long-term, are critical. This could include deciding on a specific income or transaction threshold that would trigger more bookkeeping assistance or setting time limits for tasks involving external deadlines like tax filings or loan compliance. 

 

12) Forecasting: To shape your company's future, adopt a proactive approach to financial management by utilizing bookkeeping techniques. These hacks will help you save time, which can be used to discover new methods of increasing your company's success. You can utilize financial statements to attract investors or demonstrate creditworthiness to lenders and suppliers. Additionally, by conducting financial analysis, you can identify trends and formulate plans to capitalize on them or minimize their impact. 

 

In conclusion, small business owners must avoid bookkeeping mistakes to ensure the success of their business. With NetSuite, small business owners can manage their finances more efficiently, avoid costly errors, and make informed decisions about their business. An ERP Consultant can help small business owners choose the right NetSuite pricing package for their needs and provide guidance on implementing the system correctly. Don't let bookkeeping mistakes hurt your business. Invest in the right ERP and accounting software today and get your finances back on track so that your accounting teams don’t have to be overwhelmed with countless manual procedures.