This is the first of a four part series to help small business owners identify some of the “black holes” that often exist in financial reports prepared by their bookkeeping service.
When income is being recorded, based on deposits on the bank statement, the following could be happening:
- For retail stores, cash collected for sales, could be going into your employees’ pockets rather than into your bank account.
- For businesses that are paid some time after the work is completed, your customers could be forgetting to pay you and you don’t know it.
- You are making more money than what the financial reports are telling you, because a deposit you made from a loan or a personal account is being recorded as income. This would also mean you are paying too much in tax.
When you use cash to pay for businesses expenses, the expense can be recorded only if you have a receipt. Since receipts are so easily lost, it is very likely you are making less money than what the financial reports are telling you. Also, you are paying too much in taxes because the expenses are not all being recorded.
If you identify any of these black holes in your bookkeeping, contact your bookkeeping service to see what they can do to fill the holes and make sure you are getting accurate financial reports.