Last Updated Feb 16, 2011 5:08 PM EST
Co-mingling personal and business accounts. "Almost all small businesses are initially funded by the owner's savings accounts and credit cards," says Holt. "To protect your personal credit rating and start the process of creating credit for the business, bank accounts must be separated and appropriate records kept." If, for example, if you use accounting software to keep track of what you spend, use separate systems for business and personal expenses. This will also make life infinitely easier for you if the IRS comes calling.
Reckless reconciling. "Most small businesses operate online and therefore write very few checks," says Holt. That can lead to negligent reconciling. "Reconciling your books monthly and correctly categorizing money spent for the business ensures that every expense is captured and categorized properly. Don't recklessly choose from your list of expenses which to include and don't forget to include your monthly mileage, meals and communications costs (cell phone, dedicated business phone, fax charges, etc.).
Abandoning your budget. Create your budget and stick to it. "More often than not, small business owners create a budget at the beginning of their venture and abandon it shortly thereafter," says Holt. "The key to a successful budget is not just creating it, but also sticking to it and updating it throughout the year. You should update next month's budget based on the trends from the last couple of months. As you learn the trends of your business, incorporate them into your budget. Use your expense history for the past 90 days as a guide for the next 90 days and so on."
Neglecting expenses. "Knowing which of your expenses to track and which to deduct, when to deduct and how to record those deductions monthly, quarterly and annually is important," says Holt. "You should be tracking all expenses related to your business. Make sure to have all receipts, even for the expenses that are less that $75. For small businesses, the sheer volume of expenses under $75 is staggering." So keep every receipt, no matter how small.
Turmoil with taxes. "There are several kinds of taxes that you need to be familiar with to insure accurate filing," says Holt. "For instance, forgetting to file payroll or sales tax on a timely basis can result in huge penalties. Even worse, your business could be shut down if the taxes are historically incorrect and you can't afford to rectify."
Do you have some accounting tips to share with fellow business owners? Let's hear them.
Accountant image from Flickr user billypalooza, CC 2.0