5 Common Accounting Mistakes Small Businesses Should Avoid

As a small business owner, it’s important to have an efficient and error-free accounting system. It gives you a clear view of how your business is performing, helps you plan strategically, and eases you through the busiest time of the year — tax season. 

That being said, it’s not easy to process such a large volume of data and transactions every day without making any mistakes. That’s why you should be proactive and take precautions. The more aware you are of the most common accounting mistakes, and ways to avoid them, the more likely you’ll be able to prevent any major issues from occurring. 

The following are the top five most common accounting mistakes that small businesses make and how to deal with them. 

Operating without a budget 

A budget is an essential tool to track when and how you earn or spend money. It helps you set realistic financial goals, trim costs to prevent overspending, and make more informed financial decisions. Without a budget, your business wouldn’t have a baseline to adjust financial activities accordingly, meaning you wouldn’t know if you’re overspending or underspending, and when to stop before getting into too much debt. Also, you wouldn’t be prepared for emergencies or unexpected expenses, likely leading to poor decisions. 

In other words, a business budget offers you a path to meet your financial goals.

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Not following a proper accounting procedure 

Many small business owners, self-employed individuals, and freelancers assume that only big corporations need an accounting procedure. This is incorrect because despite having fewer transactions in a month, lacking an accounting procedure still increases your chances of making errors or miscalculations, costing time and money every time you need to fix them. It’s best to set up formal, documented, and detailed procedures for managing bookkeeping and accounting procedures. In addition, to enhance your accounting consistency and accuracy, you may want to create standardized forms and checklists for each activity. For example, below is a checklist of information you have to enter into your accounting software whenever you have a new vendor:

  • Vendor’s name
  • Vendor’s address
  • Telephone number
  • Employer Identification Number (EIN) 
  • Insurance certificates
  • Letters of recommendation
  • Signed contracts. 

At first, you may think this is too complex, unnecessary, and takes up too much time. But in the long run, you will have a smooth and efficient accounting system with minimized accounting mistakes.  

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Neglecting documentation procedures

You may end up losing a lot of money if you fail to document business expenses required for tax deductions. Without the right supporting documentation, the IRS can disqualify your tax write-offs or even penalize you. Here are a few tips to help you maintain a productive documentation system: 

  • Set up new policies: you can  introduce regulations to encourage your employees to store receipts and relevant documents better. For example, your company can only agree to reimburse expense reports if receipts are attached.
  • Go paperless: Paper documents, especially receipts, are easily lost or damaged. That’s why more and more businesses opt to use technology to convert all paper receipts into digital and have them stored securely in the cloud. Shoeboxed — one of the most popular choices on the market — can help you with that. With Shoeboxed, you can digitize every paper receipt in seconds and have your data automatically extracted and categorized. Switching to digital makes documentation procedures a breeze!
  • Only pay when receiving a bill: it’s not that uncommon for a vendor to request payment before issuing an invoice. It is inadvisable to make payments prior to receiving documentation, however,, as it can always be used against you. More importantly, if a dispute arises, you’ll likely lose that money.

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Doing bank reconciliations infrequently 

Another common accounting mistake is not doing bank reconciliations regularly. This mistake is often made by small businesses because they assume that only big companies with a large number of transactions need to do reconciliations. 

Bank reconciliations are vital to every business’s success – it’s the process of comparing your accounting books to bank statements to ensure the data on both documents match and are accurate and correct. By performing bank reconciliations frequently, you can catch mistakes in a timely manner, big or small, and take immediate measures before they get out of hand. A few other benefits that bank reconciliations will bring to your business are: 

  • Prevent fraudulent activities 
  • Keep track of your cash flow 
  • Identify and report bank errors 
  • Detect payments that have bounced or failed to post.

Remember, the longer you go without doing bank reconciliation, the more difficult it will be to catch up, which ends up taking a lot of time, money, and resources. 

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Failing to back up your accounting data 

What would happen if the device on which you kept your company’s financial data was lost, hacked, or stolen, and you didn’t have a backup? You would lose all of your confidential financial data.  

This kind of problem can occur at any time, to anyone. That’s why you should be well prepared in advance by having a backup for your accounting data. It’s quite easy today as many small business accounting software programs allow you to set up an automatic backup of your data. It’s also a good idea to  go through your backup files every now and then to ensure they are all working. That way you know you have everything you need to continue operating your business, even in an emergency situation. 

Final thoughts 

Whether you do your own accounting or hire a professional, making accounting mistakes can result in serious problems for your company. It is better to address and avoid these issues before they escalate and cause far more damage.

Shoeboxed can help you with that. 

Shoeboxed is a helpful receipt scanner software for freelancers, small business owners, and DIY accountants. It helps you clear your piles of documents and turn them digital with ease. Shoeboxed automatically extracts and categorizes important data from your receipts, which then gets manually checked and approved by a team of data experts
Go paperless for FREE with Shoeboxed!

Checkout Conversion Rate: What Is It? And How Can Online Businesses Improve It?

Income is the bloodline of every online store. There are many factors that influence an e-business’s profitability. Today we will introduce you to an element that has a great impact on your business: checkout conversion rate.

Let’s say that your online store has hundreds of visits per week, but only a few of them make a purchase. How can you persuade more of your visitors to buy your products? Read on to find out what checkout conversion rate is and strategies to improve eCommerce conversion rate. 

What is a checkout conversion rate?

The checkout conversion rate is an important metric for every e-commerce business to follow. It refers to the percentage of customers that start and finish the checkout process in a particular amount of time. 

Online businesses can monitor patterns and inconsistencies by tracking conversion rates on their checkout page over time. With this approach, e-businesses will be able to learn more about which components of the checkout experience resonate with their consumers and which might be improved. As a result, a slight improvement in checkout conversion rate can substantially increase income.

Shopping cart abandonment is directly linked to e-commerce checkout conversion rates. This represents the percentage of consumers who add products to their shopping cart but never finish the transaction. We’ll learn more about shopping cart abandonment in the next section.

Why do customers abandon their shopping cart?

Cart abandonment is a common issue. For one reason or another, customers often leave an e-commerce site without making a purchase, even when they’ve put goods in their cart. According to research company Baymard Institute, the average cart abandonment rate is 68.8%, which means that nearly seven out of ten customers have put items in their cart but don’t finish the transaction. 

Here are some common reasons:

  • High extra costs (shipping, tax, fees, etc.) 
  • Too much information required
  • Slow delivery time
  • Complex checkout process
  • Lack of trust in website security
  • Want to save the items for later
  • Lack of preferred payment option
Reasons for shopping cart abandonment ( Source: Baymard)

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4 strategies to improve checkout conversion rate

  1. Convert to a single-page checkout process

The checkout procedure should be as quick and smooth as possible for your customers. People are busy, and whatever you can do to save them time and speed up the process will help you secure a sale.

This is when a one-page checkout comes in handy. Here are some benefits a single-page checkout process offers: 

  • It’s shorter and gives customers an incentive to complete the transaction.
  • It has all the fields on the same page, avoiding unnecessary complications for users.
  • It requires fewer clicks. Behavioral research shows that the fewer the number of clicks required to complete an action, the higher the conversion rate.
  • It reduces the chance of website errors occurring between one checkout page to the next. 

The famous hypermarket Walmart has an excellent single-page checkout. It has a 3-step process with each step including a minimal form that is easier to navigate. 

Walmart single-page checkout (Image source: Ecommercebooth)
  1. Skip the mandatory sign-up

Due to the fear of personal data being leaked or tracked, online shoppers are becoming increasingly hesitant to provide their personal information to your website. Though customers may enjoy your items enough to purchase them, only a small percentage of them want to register an account right at the start of their buying journey.

Despite this, many e-commerce businesses continue to force their potential buyers to create an account for user information collection and to send newsletters. Rather than being excited to take advantage of a newsletter with deals and promotions, this forced account creation may actually lead to prospective customers giving up on buying altogether.

If you’re concerned that you won’t be able to develop a user database without mandatory sign-ups, keep in mind that you can always request a buyer’s contact information during the checkout process. The essential thing is that you give them an option, not an obligation.

If customers had a good shopping experience, they’ll come back and realize the value of having an account. You can also send them emails to encourage them to join your program.

  1. Offer free shipping

The delivery fee is one of the most common reasons for online shoppers to abandon their shopping carts. Customers visit a store and put items into a cart, but at the end of the checkout process, if they discover that they don’t qualify for free delivery or that the fees are too high, they will ditch the deal. 

Free shipping is what most online shoppers value. Shoppers are thrilled when they find a good deal and will take advantage of every opportunity to save a few dollars. Therefore, though it involves a cost for online businesses, offering free shipping significantly boosts eCommerce conversion rates. Besides, it’s not too difficult to calculate and work in the price of shipping into the product price

  1. Use shopping cart recovery emails

Sometimes, all it takes to bring back a customer to your site and entice them to complete their purchase is a little push. Enter shopping cart recovery emails. These shopping cart recovery emails are emails sent to a visitor who has abandoned the checkout process halfway through with the promise of a special deal or promotion for them to close the purchase.

Shopping cart recovery emails are incredibly successful. According to statistics, 46.1 percent of all such emails are opened (the mean open rate for all emails varies from 10-25 percent across industries). One out of every eight of these emails is clicked, and a third of those clicks result in a sale.

To get the most out of a shopping cart recovery email, online businesses should tap the customer when the lead is still “warm.” Typically these emails are sent 1-3 hours after the abandonment when your brand and your product is still fresh in the visitor’s mind. One important note is that you should check the items they’re interested in are still in stock before sending out these emails.

The bottom line

To every online business, the checkout conversion rate is a key metric that affects their ability to turn visitors into customers and close sales. That explains why e-businesses always look for methods to improve this point. For those looking for tactics to increase checkout conversion rate, following the advice you read in this article will be just what you need.

If you’re interested in entrepreneurship stories, business tips, or productivity tools, find more posts like this on the Shoeboxed Blog. Shoeboxed is a cloud-based software that helps businesses turn their massive paper receipts into digital data. With Shoeboxed, you can accomplish a variety of tasks: scan, store and organize receipts, manage business expenses, store business cards and even track mileage for business travelers. It’s simple to install and easy to use. Have a look at Shoeboxed now and see how it can transform how your company works.

What is a Bank Transaction Receipt and its Benefits for Your Business

Whenever you visit a bank and make a monetary transaction, such as a deposit or withdrawal, the bank will provide you with a bank transaction receipt. This is how banks keep an accurate and up-to-date record of all financial transactions conducted at a given location by various account holders. 

Since this financial term is used in many situations in daily life, it’s good to have a basic understanding of bank transaction receipts and how your business can benefit from them. 

What is a bank transaction receipt?

A bank transaction receipt (also known as a bank receipt) is a standard form of documentation for most financial transactions. Customers who go to banks or other financial institutions to conduct any monetary transactions should expect to receive a bank receipt for these transactions. 

Besides transactions involving deposit accounts, these receipts are also sent to customers who make loan payments, credit card payments, and conduct other similar types of transactions. Bank transaction receipts are also given to businesses that conduct financial transactions at a given bank or financial institution. 

Banks also keep their own copies of bank transaction receipts. This ensures thorough record-keeping for all financial transactions for each of their various account holders. These receipts are also a form of collateral. If a customer makes a request, the bank will have a detailed record of the transaction to refer back to. Whether a bank employee makes an error or an account holder miscalculates a portion of the transaction, bank transaction receipts make it much easier to resolve disputes. 

In the past, bank transaction receipts were paper slips. However, in recent years, many banks have begun to offer digital copies of receipts (by email,  text message, or other methods). 

Using digital receipts rather than paper receipts enables the bank to save on printing costs. Digital receipts also provide convenience for account holders as they no longer have to keep track of numerous paper receipts. 

Bank transaction receipt details

A bank transaction receipt contains detailed information about a financial transaction conducted at a particular bank. The form of the receipt may vary by bank or institution, but all bank transaction receipts must include these essential details: 

  • Bank account numbers
  • Account holder name(s)
  • Date of transaction
  • The total amount of the transaction

Sometimes a bank transaction receipt will even include detailed information such as the employee number of the bank employee who conducted your transaction. 

How to use bank transaction receipts for bookkeeping

Given the importance of bank receipts to businesses, you can make use of these documents and turn them into a helpful tool for your bookkeeping practices, either for personal or business expenses. In fact, many banks and other financial institutions recommend balancing your account books on a monthly basis and referring to your bank transaction receipts throughout the process. It’s common to go over monthly bank statements and cross-check this information with all of your bank transaction receipts that you have collected for a given month. 

Even if you hire a professional accountant to track your personal or business finances, they will request a copy of your bank transaction receipts. Bookkeepers use this information to track your income, expenses, and other financial transactions impacting your cash flow. This financial data helps keep an accurate and real-time record of your financial activities. 

Bookkeepers also use bank transaction receipts for data entry purposes to track your credit card payments, which can help you control your spending. Bank transaction receipts can even help you improve your credit score over time with good bookkeeping practices

Some people prefer to use receipt tracking mobile apps that automatically track this information in real-time instead of working with an accountant. You’ll no longer have to keep a hard copy of your bank transaction receipts by using mobile apps, as this information is readily available on your mobile device. You only need to make sure that you store these physical copies of your bank receipts before uploading them into a cloud-based system. After scanning your documents with a versatile mobile app, you can free your desk and drawers from piles of paper receipts and keep them for years!

See more: 5 Best Receipt Scanner and Organizer Apps for Small Businesses in 2021.

How to use bank transaction receipts for taxes

Bank transaction receipts can be very beneficial when preparing for tax season. To work on the tax reduction process, first, you need to collect all proof of purchases for your business expenses. Next, you need to find the right tax form and fill in all the details. The last step is to submit the form and then you’re good to go. 

Business owners can use their bank transaction receipts to balance their accounts. You can do this by reviewing the monthly bank statement and comparing the amount and transaction dates of items listed on the statement with their bank receipts. 

Typically, businesses will keep their bank receipts until the end of the year for tax preparation purposes. Individuals who claim tax deductions for certain types of expenses must also keep copies of bank transaction receipts to prove that they qualify for deductions related to banking transactions, such as interest charges or mortgages.

The bottom line

Bank transaction receipts, along with business plans, marketing strategies, and financial reports, are essential documents for all businesses. Keeping and managing these documents properly can help track your business’s financial performance, solve disputes, keep the bookkeeping up to date and even claim tax deductions with ease. A simple yet effective way to achieve this is to digitally scan and store your important documents. 

Shoeboxed is a painless receipt-scanning and organizing solution for freelancers and small business owners. After scanning your receipts with the Shoeboxed app, our OCR engine will automatically extract the most important data points and automatically categorize them by vendor, total spent, date, and payment type. After that, our staff will double-check to ensure that all of your data is human-verified, categorized, organized, fully searchable, and available on any device. Shoeboxed keeps your bank transaction receipts in a safe place with high accessibility. 

See also: How To Scan A Receipt Digitally With The Shoeboxed App.

The Shoeboxed app is available on iOS and Android. You can try Shoeboxed for free before choosing the perfect plan for your purposes!