Most Common Mistakes to Avoid in Bookkeeping for LLC

Bookkeeping for LLC is a core part of the business finances and can have a significant impact on the growth and profitability of your business. It can encompass a variety of tasks, such as billing a customer, recording a fixed asset, or paying compensation to employees. 

Since bookkeeping is the backbone of any business, there are many potential mistakes that can damage your accounting and financial system. This article will introduce the most common mistakes to avoid in bookkeeping for an LLC. 

Mixing business and personal expenses

It may appear simple to cover a work expense with private money. However, combining your funds tends to make financial reporting (and taxes) more difficult in the long term. 

To prevent this stumbling block, make an effort never to use your cash to support business costs. Here is some advice to help you stay on track:

  • Manage your company’s finances with separate business bank accounts.
  • Have a separate payment method for your business (e.g., only using credit cards or checks instead of cash).
  • Stick a logo on your business credit cards to differentiate them from your personal cards.
  • Keep a small sum of money in your corporation checking account to pay unexpected business costs (so you aren’t inclined to use personal funds when you have your business accounts).

Failure in reconciling bank statements and accounts

This mistake in bookkeeping for LLC can result from mixing business and personal expenses. It could become a serious issue in the future if you don’t use separate bank accounts for your personal and corporate finances.

Using a single bank account can cause confusion between your personal and formal company spending. The IRS may request a detailed record of your entirely business-related expenditure if you are audited.

It’s a good idea to use separate bank accounts for personal and official activities. This simple practice helps you reconcile your bank statements and invoices at the end of each month. You can also identify the source of your finances and avoid any possible auditing events.

Throwing away receipts

If you lose your receipts (or throw them away), you won’t be eligible to claim the business deductions you created on your tax forms. We have already published several articles about the importance of keeping business receipts, make sure to check them out! 

Here are a few points to bear in mind to storing your business receipts:

  • It is perfectly acceptable to keep and use the online version of your receipts.
  • You may need to keep your receipts for up to six years. 
  • You can scan your receipts and save them in a cloud system such as Google Drive, Dropbox, or Shoeboxed to keep them safe for years without being damaged by fire, flood, or faded ink. 
  • Try to keep as detailed records of all business expenses (especially for meals and entertainment) as possible. You can claim a significant deduction from them. 

Recording payments to yourself as an expense

Don’t record the payouts as a possible cost when you charge yourself as a sole trader or a separate LLC. It’s a simple mistake to make. However, it will reduce your total financial gain and showcase an utterly bogus total for the earnings you must pay taxes on. Instead, deposit these funds into “Owner’s Draw.”

Neglecting sales tax

One of the most costly minor business bookkeeping blunders is failing to account for and pay sales taxes. Not paying enough attention to the measurement and processing of sales taxes can lead you to IRS penalties and fines. If you input information improperly, you may wind up with an invalid overall sales amount and, as a result, the obscene amounts of revenue taxes due.

We suggest that you work with your accountants and lawyer to ensure that your company complies by submitting the correct amounts of sales tax.

Tracking reimbursable expenses improperly

Accounting for business expenses from your own money is often a must, and one small business accounting error is failing to document refundable charges. If you fail to track these expenses, you potentially lose money and lack the right to claim tax breaks.

The solution is to build a documentation system that allows your organization to manage and document all reimbursable expenses regularly and easily. And Shoeboxed can help you with that!

Shoeboxed is a receipt management application that turns your receipts and business documents into a digital format in just one click by taking a picture straight from your smartphone or scanning a pdf. It automatically extracts, categorizes, and human-verifies important data from your receipts so that you can go over and check your records anytime with ease. Shoeboxed ensures you will always have your receipts securely stored and ready for tax purposes.Access your Shoeboxed account from your web browser or smartphone app. Stay audit-ready with Shoeboxed for FREE now!

Important Must Know About Bookkeeping And Transaction Receipts For Truckers

To our dear truckers, how is your driving today?

This article is a basic guide on bookkeeping for truckers! Truck drivers and business owners, who are starting a business, a trucking company and who is interested in knowing more about bookkeeping, its role in business, and the best practices.

We hope that as you are reading this article, you have returned from your trips safely and are having a good rest instead of struggling over all the transaction receipts that keep piling up every day.

Bookkeeping for truckers

What Is Bookkeeping?

To simply put, bookkeeping is the activity of keeping records of and organizing the financial affairs of a business. It mainly involves the recording of all the financial transactions that occur in the course of the business on a daily basis, ranging from sales earned revenue, earned interest, to payroll, payment of taxes, and operational expenses.

Read more on Everything You Need to Know About Virtual Bookkeeping Jobs and How to Get into this Exciting Work

Sounds like a lot of work, doesn’t it?

The real responsibilities of a bookkeeper can be even more overwhelming, but they are considered an indispensable part of any business. Because every penny earned and spent is tracked by bookkeeping. Bookkeeping provides important source data for the process of accounting, which focuses on summarizing, classifying, analyzing, and interpreting this financial data.

Therefore, to say that accounting starts with, first and foremost, proper bookkeeping that maintains accurate and up-to-date records is not an overstatement.

Read more on 5 Common Accounting Mistakes Small Businesses Should Avoid

Why Is Bookkeeping Important For Business?

For companies and organizations, many of their major functions depend on the information recorded in accounting books.

Which products have been selling well? How profitable is the business at a point in time? What purchases have been made? Anything that may affect the income and expenditure of the business can be identified easily with good bookkeeping.

Not only does bookkeeping offer a realistic ‘snapshot’ of the business performance at a specific time, but it also plays a fundamental role in helping business owners make strategic decisions. For example, allocating its budget, making new investments, adjusting the workflow, or reassessing the financial plan. 

Read more on 7 Steps of The Accounting Process for Small Business

External users, including investors, financial institutions, and the government also rely on the information accessed through bookkeeping to have a comprehensive understanding of the business’s current situation and future prospects.

Actions speak louder than words, but in the case of doing business, numbers speak loudest than all. Piles of receipts and their seemingly emotionless numbers, then, are not to be overlooked at all costs.

Small and big businesses alike need to bear this in mind and ensure that their bookkeepers, accountants, or any other people and organizations that they entrust to carry out bookkeeping activities, are doing a decent job.

Read more on:

Transaction Receipt

What Is A Transaction Receipt?

A transaction is a completed agreement between a buyer and a seller to exchange goods, services, or financial assets in return for money.

In business bookkeeping, a transaction may be recorded by a company earlier or later depending on the accounting system it uses. Accrual accounting recognizes a transaction immediately after it is finalized while cash accounting, used mostly by smaller businesses, instead records a transaction only when money is received or paid out.

Why Is It Important To Keep Track Of Transaction Receipts?

Since there are various transactions going on daily within a business that may get out of hand without adequate management, keeping track of transaction receipts as a kind of proof that something of value has been transferred from one party to another, is a must, whichever accounting system is being used.

In other words, a receipt can be seen as proof of ownership that results from a transaction. A transaction receipt should show basic information of the sale or purchase such as the payer and payee, the value of the transaction, date when the transaction is completed, method of payment, and evidence of fund transfers. 

Read more on:

Strictly speaking, all types of receipts are necessary for the business to some extent, and we had better not take the risk of missing any of them, even when they are only cash slips for small cash payments. The Internal Revenue Service recommends retaining several types of receipts that document certain expenses for tax purposes, like cash register tapes, receipt books, invoices, credit card receipts, and statements, etc. Moreover, receipts are also required in basically any return/refund policy, making them an essential product warranty from the perspective of both sellers and customers. 

Taking the importance of transaction receipts into account, keeping them safe and sound is of high priority for the accounting department of any business. While conventional paper receipts are still in practice, they are now mostly used alongside digital receipts that are easier to be stored, preserved, retrieved, and reproduced. Bookkeepers, thus, need to be aware of this trend and make sure that every receipt is kept in place, in their books, and on the cloud, readily accessible and retrievable on demand.

Bookkeeping Best Practices For Truckers

For truckers who spend most of their days on the road, bookkeeping may not be the first thing on their priority list. However, as in other kinds of businesses, trucking companies and owner-operators must pay their utmost attention to getting the business up and running by fulfilling the back-office tasks. Keeping their books organized is just as important as completing the shipping missions because knowing that all receipts, expenses, and purchases have been carefully recorded, truckers can focus on driving with peace of mind. 

To those who are new to the trucking industry, the off-the-road workload of a trucking business may be unexpectedly heavy. Some major duties of a trucking bookkeeper include, but are not limited to, tax management, billing and tracking customers’ payments, maintenance management, and creating trip records. 

Bookkeepers’ responsibilities

  • Keep track of dispatches. We don’t need to emphasize more the significance of having customers pay on time for the carrier’s services! It goes without saying that the business income, as well as profits, depends largely on this, so making sure that all dispatches are billed and paid is the most basic job a bookkeeper must do.
  • Keep track of each trip’s expenses. The world of trucking is on the road, and every trip counts when it comes to managing business costs. Besides your driving license, don’t ever forget to collect all the fuel receipts and keep them in a safe place. 
  • Keep track of taxes such as the IFTA and IRP. One of the first lessons in dealing with trucking finances is taxes. Taxes specific in trucking business include International Fuel Tax Agreement (IFTA) and International Registration Plan (IRP) related fees. Calculating these taxes can be really confusing or even stressful because of the varying rules and regulations applied to each state which fluctuate from year to year. What’s more, failures to submit IFTA and IRP reports and making tax payments also lead to severe fines or penalties that no trucker wants to experience. Here’s where bookkeeping comes to the rescue with all fuel purchase receipts stored and classified neatly, which makes tax management much less time and energy-consuming.
  • Pay the drivers. This entails tracking their driving records, but more than simply paying for their labor other aspects such as insurance and medical care should be included to ensure their health and safety are cared for as well.
  • Pay the maintenance bills. As a truck driver, your truck is your biggest asset. A truck in a good condition keeps your ride safe and is crucial to the life of your trucking business. Just like regular health check-ups make people aware of their well-being and identify health risks at an early stage, regular maintenance can help the driver avoid unnecessary repair costs or purchases if some parts are broken and require replacements due to late repairs.

Shoeboxed can help!

Shoeboxed is an expense tracker app that stores all your bills on the cloud and allows you to make a report out of it easily. All you have to do is scan your bills, organize them the way you want, and you’re good to go. Shoeboxed will make your expenses tracking and management a breeze!

3 Bookkeeping Mistakes to Avoid

Bookkeeping is a key component to any successful business, but it can be complex and time-consuming if you don’t have the necessary knowledge and experience. Mistakes with your books can also be expensive to fix. Read on for three bookkeeping mistakes you should take care to avoid in your small business, courtesy of our friends at Bench.

This guest post is brought to you by Bench, the online accountants that use your Shoeboxed receipts to build you tax-ready financial statements.

Bookkeeping is a key component to any successful business, but it can be complex and time-consuming if you don’t have the necessary knowledge and experience. Mistakes with your books can also be expensive to fix. Read on for three bookkeeping mistakes you should take care to avoid in your small business.

1. Mixing Business and Personal Finances

In the event of an audit, having business and personal expenses combined can be a very costly mistake. Under audit, the IRS may take a sample of a period of a few months to see the volume of personal expenses on your books. If they find many personal expenses, they’ll extrapolate that to the entire period and apply taxes for that amount. As you can imagine, this is an expensive consequence of not separating accounts. If you have an LLC or corporation, you have even more reason to be vigilant about separating expenses – in fact, you’re legally required to do so. Failure to comply could result in a lifting, or piercing of the corporate veil, which opens you up to unlimited personal liability.

2. Doing it Yourself for Too Long

While a DIY approach is good in the beginning when the books are simple, as your business grows you’ll need to decide on a more robust system. To determine when the time is right to hire a professional, calculate your hourly wage and multiply it by the number of hours you spend bookkeeping – hours that could be spent improving your business in other ways. When the cost to do it yourself matches or exceeds the price of outsourcing it, you may want to look at your options. And remember, many professional services expenses can be deducted!

3. Trashing Receipts

Part of tracking expenses is maintaining records that prove the legitimacy of those costs. While the IRS doesn’t require receipts for expenses under $75 (provided you can show a bank statement), they can still be helpful to have for bookkeeping purposes. Not to mention, the more evidence you have, the better off you’ll be in the event of an audit. And in this day and age, keeping a thorough record of your expenses is no reason to clutter up your office; digitize your receipts with Shoeboxed or send them directly to your Bench bookkeeper. The following receipts are important to keep, so take extra care with them:

  • Meal and entertainment costs
  • Business travel costs
  • Mixed-use assets (for example, a vehicle used for personal and business, or the home office).
  • Client gifts

While it may be a pain point for your business, thorough bookkeeping is key to long-term success. Avoid these expensive mistakes by doing your research and bringing in help when you need it.