Jan 9, 2023 Author: Accounts Junction
As a sole trader, you might be busy with several important business activities tending to neglect bookkeeping.
However, it can be very problematic for accounting and overall business if the bookkeeping is not done properly. If you want to maintain steady finance and proper growth of the business then you have to bring accuracy to bookkeeping.
It is observed that there are some common sole trader bookkeeping mistakes. They often occur which later become a cause of many complications. If the staff is not proficient, then there can be repetitive bookkeeping mistakes that can impact the accounting.
It would be worth looking at some of the common mistakes that are observed in sole traders' bookkeeping activities.
What are common sole trader bookkeeping mistakes?
If the bookkeeping activities of a sole trader are not done properly then there can be some common mistakes.
Here are some common bookkeeping mistakes observed about the sole traders:
1. Poor handling of accounts receivables
Accounts receivable is very important to ensure that business receives their money properly on a given duration.
Sole traders are observed to pay less attention and priority to the receivables that they are supposed to get. This impact the cash inflow causing lesser cost despite business growth.
2. Improper bank reconciliation
Proper checking of the bank statements against the accounting books is essential. It ensures that there is no fraud and no missing financial information.
Sole proprietors tend to have improper bank reconciliation. This later causes a lot of mess-up in the accounting books.
3. Mixing business finances and personal finances
Sole proprietors tend to neglect the line between business finances and personal finances. It might look fine when the business is small and handled by sole traders.
However, if this is neglected it becomes difficult to demarcate the cost and revenue in the business. It also becomes difficult while tax calculations during tax filing. Getting any credit and loan also becomes difficult when both finances are not demarcated properly.
4. Not restoring the receipts
Receipts are very important for bookkeeping that help to calculate the cost incurred. It also helps to claim the tax deducted and pay fewer taxes wherever applicable in the business. Sole traders are found commonly neglecting the restoration of all the important receipts which then further causes a lot of mess and impacts their profits.
5. Not using proper accounting software
This is one of the common sole trader bookkeeping mistakes where they tend to not understand the importance of accounting software. They consider their business too small for using accounting software.
However, accounting software minimizes the time and effort of every business for bookkeeping, irrespective of their size. Many bookkeeping activities can be automated with software to bring accuracy.
These are some of the common bookkeeping mistakes observed among sole traders. If you could avoid these common mistakes then you can achieve a lot of efficiency in bookkeeping.
Being a sole trader, it is advisable that you get totally relieved from bookkeeping tasks by simply outsourcing bookkeeping services for traders. You can outsource this task to any expert bookkeeping services providing agency.
Accounts Junction provides several accounting-related services for businesses. You can outsource bookkeeping services for traders here to get quality services.
They have staff who are well-experienced in handling bookkeeping services for sole traders. Accounts Junction is a proficient accounting service-providing company with clients all over the world.
