5 Common Bookkeeping Pitfalls

5 Common Bookkeeping Pitfalls and How to Avoid Them

Although most entrepreneurs recognize the importance of careful financial management, few want to spend their time dealing with numbers. Unfortunately, not keeping a close eye on your income and expenses can be very costly for a business.

Here are 5 common bookkeeping pitfalls and some simple tips for getting back on track.

1. Mixing business and personal

All too often, entrepreneurs adopt a “buy now – sort later” approach to expenses, using the same credit card for personal and professional purchases. At the end of the month, they’re left poring over statements, trying to sort things out. Mixing business and personal expenses costs extra hours of bookkeeping each month, and muddies your overall financial picture. Avoid this pitfall by using a separate credit card and bank account for business, and by being disciplined about separating expenditures

2. Neglecting to track reimbursable expenses

Receipt-tracking is a necessary part of business ownership. You need to keep track of receipts to understand spending patterns and effectively manage your company’s finances. And if you want to claim deductions at tax time, you’ll need to submit receipts along with your tax return.

But far too many business owners take a haphazard approach to collecting and organizing receipts—especially while on-the-go, where a whopping 50% of their expenses are generated. Get the deductions you deserve and simplify tax prep by using an expense-tracking app. options like Expensify and MileIQ can record mileage, billable hours, and other expenditures, as well as generate expense reports. Plus, many of these apps sync seamlessly with your business bank account and accounting software.

3. Not taking advantage of technology

Are you still relying on manual accounting methods? While basic spreadsheet tools can get the job done, they leave the door wide open for human error. Mortgage loan giant, Fannie Mae, once uncovered a $1.1 billion error on their Excel spreadsheet, citing “honest mistake” as the cause.

What’s more, manual methods simply can’t match the technological benefits offered by software like QuickBooks, Freshbooks or Xero. These systems track invoicing, link with your credit card and business account, organize expenses, and generate insightful financial reports.

4. Not keeping books up to date

Let’s be frank. Most business owners don’t look forward to that weekly appointment with “the books.”  In fact, many entrepreneurs cite bookkeeping as their most dreaded responsibility and will find a host of reasons to avoid it.   Once you get behind on your books, it just gets harder to catchup.

5. Doing it all yourself

It is completely understandable for budget-conscious entrepreneurs to try to cut costs by handling bookkeeping on their own. However, taking advantage of professional help, even on a part time basis, can generate substantial savings of time and money over the long term.

Time to get savvy about bookkeeping.

The biggest pay off? Avoid these 5 common bookkeeping pitfalls and save time with these bookkeeping tips.  Doing this will allow you to invest your talents and energy where they will be most profitable.

8 Common Problems New Freelancers Face

8 Common Problems New Freelancers Face

8 Common Problems New Freelancers Face

Freelancers in all industries deal with the same problems due to the nature of their work.  Typically, freelancers are solo work-from-home contractors that manage every aspect of their business.  If you’re thinking of dropping your career as an employee to begin freelancing, consider the following obstacles you will need to navigate. Unfortunately, problems beget more problems, and a shaky foundation quickly leads to a crumbly business and many regrets about starting in the first place. 

 Bad clients 

 Clients who demand too much work for too little pay, clients who do not pay on time, and especially those clients who do not pay at all define our expectations for the next client.  Often, new freelancers do not know how to tell the difference between a good client and a bad client until after the contract has been signed.  Or worse, a contract is never signed and the freelancer accidentally does work for free—much to the delight of the shady client. 

Bad pricing 

Pricing that is too low attracts bad clients like flies to a dead horse. The outrageously low-price signals that the freelancer who made this bid or asked for this rate absolutely has no idea what they are doing and does not value his or her work; that they are new and can be taken advantage of.  If you price your work reasonably, you are much more likely to attract reasonable clients. 

An unprofessional website 

 Too many freelancers have websites that look like they were built in the late 1990s. It’s important to create a user-friendly website that clients will find aesthetically pleasing, whether you made it yourself or hired a web designer. A professional website signals that you take your work seriously and demand to be treated with respect. A clear photo somewhere on your homepage also helps your client to see that yes, you are human, and no, you are not likely to be okay with doing work for free. 

 The lack of experience 

 This is a tough one. Of course, if you have just started in the world of freelancing, you don’t have much freelance experience. Fortunately, it’s very similar to when you got your first job. Apply for smaller, lesser-paying jobs and work your way up to well-paying gigs. With freelancing, it is typically easier to attain higher-level jobs than if you were, say, working in retail. A freelancer with an extensive portfolio on their professional website is very likely to be trusted for larger projects. 

 A shortage of initiative and drive 

 New freelancers start with a seemingly inexhaustible enthusiasm and as much passion as you could find in a young and overly optimistic entrepreneur. This, like the effect of caffeine in the morning, wears off before much work has been accomplished. Then the initiated freelancer hits an unexpected snag or feels overwhelmed with the amount of work to be done, and wonders why they ever started in the first place. A sense of drive and ambition need to overcome all obstacles in order to succeed. As a self-employed business owner, a freelancer has no boss spurring them on. Since many lack self-discipline and an intrinsic sense of motivation, freelancing is certainly not for everybody. 

 Persistent feelings of inadequacy OR a tendency to blame others for perceived failures 

 Failings of motivation usually stem from feelings of inadequacy, and lack of initiative comes from a tendency to shift responsibilities. If a freelance worker suffers from low self-esteem, where will the confidence come in to market themselves and negotiate project costs effectively?  It’s also easy for a freelancer to blame the dearth of good clients than take responsibility for the fact that their market strategy is failing. 

 Not researching enough 

 Sometimes these personal failings could be fixed through simple research. Knowing what other freelancers have done in similar situations increases confidence in making business decisions.  Minor successes that result from positive business decisions and overcoming obstacles build motivation. Research on business matters affects mood and level of dedication to making it as a freelancer, and is therefore crucial to the beginning of any endeavor in freelancing. 

 Not understanding freelance work 

 Many aspiring to self-employment simply do not have any idea what freelancing entails.  Contracting services to other organizations or individuals requires lots of time and effort that won’t immediately earn a profit. Employees tired of their own work lives idealize the idea of freelancing, and often ignore the difficulties faced in this environment. Before counting on notions of an optimal freelancing experience, consider your own life; your strengths, talents and abilities. Ask yourself these questions: “Am I truly ready to begin a long-term career in freelance work?” and “What do I want to achieve through freelance work?” 

 If you are currently a new struggling freelancer, tackling these problems from the bottom up streamlines the path to success.  If you ever become discouraged, remember that everyone starts at the beginning, and that you too can achieve your desired level of success if you put in the work to attain it. 

Thank you for reading our article,  8 Common Problems New Freelancers Face.  

Good luck on your new adventure! 

 

5 Ways to Save Money for your Business 

5 ways to save money for your business

5 Ways to Save Money for your Business 

 

Looking for simple ways to cut costs? These tips will help you make a  noticeable difference to your bottom line. 

1. Reduce staff costs 

Without a doubt, having someone to help deal with routine tasks can greatly improve productivity. The rub is that hired help is often too expensive for small business owners. Internships can be a real win-win: a student gets hands-on experience assisting you with marketing, accounting or administrative work and you get time-saving help for free. 

Cloud Sourcing a qualified remote worker is another cost-effective way to bring on some,  much needed support for administrative tasks. 

2. Think thin 

 Small business owners are often advised to trim down their offerings to a niche market. You can save money by applying that same thinking to how you do business. For instance, subcontracting can allow a service-based business owner to keep a narrow focus on the work they do, while attracting more customers. Taking on more work and paying someone to do it, at a lower rate than you charge for your services, will increase capacity and your bottom line – while maintaining your focus on what you do best. 

3. Network more 

 Forget expensive print ads and direct mail campaigns. You can save a ton of money getting the word out about your business by connecting directly with your target market: 

  • Co-host an event with a business owner whose customers will be interested in what you offer. 
  • Connect with your local Chamber of Commerce. 
  • Attend business networking referral events. 
  • Run a contest on social media. 
  • Sponsor a community fundraiser. 

Networking at trade shows and industry events is another great way to meet potential partners and customers, without breaking the bank on costly advertising fees. 

 4. Embrace co-opetition

Often businesses buy in bulk to save money but purchasing in volume can backfire if you’re struggling to maintain positive cash flow, and the cheap supplies you bought never get used. 

A better strategy is to only buy what you need and to share costs with other small business owners. Co-opetition is becoming a buzzword for good reason. Forming alliances with businesses can lead to lucrative partnerships while collectively saving everyone some cash. 

5. Save time with technology

 If you haven’t yet made the leap, adopt cloud-based software to improve operational efficiency, try free collaboration tools like Google Drive. It is also a great way to cut down on the cost of paper. Use virtual meeting technology to save a small fortune on travel costs when connecting with clients in different time zones. And do a free trial of accounting software to see how automating routine tasks like invoicing and payroll can improve accuracy and free up hours from your schedule. 

 Final tips 

Review your business expenses on a regular basis to track rising costs and to find more ways to reduce unnecessary spending. A few final – and costly – pitfalls for busy small business owners to avoid: 

  • Always pay vendors and lenders on time to dodge late fees, interest and a poor credit rating. 
  • Shop around for the best deals on everything from software and financial services to office supplies and inventory. 
  • Hold off on renting space for as long as possible. Encourage staff to work remotely, meet clients in coffee shops and remember: home office space is an eligible tax write off. 

          What will you do differently to start cutting costs for your small business today?