- July 30, 2020
- Posted by: BackOffice LLC
- Category: BackOffice Blog
To say that most business owners typically don’t enjoy doing their own bookkeeping and accounting tasks is an understatement. However, some have to do it since nobody else can, and they may not yet be financially able to hire someone for the job.
Are you one of them? If you are still doing your own books, you may be making common mistakes that can cost your business financial success.
Let’s look at some of the most common hospitality bookkeeping mistakes that you should be aware of.
Top 9 Bookkeeping Mistakes
Poor record management
Many businesses in the hospitality industry don’t have a proper receipt and record-keeping system. This is extremely unfortunate, since there is no way to see how your business is doing if you are not recording your daily financial transactions, keeping track of receipts and inventories, or using a proper filing system.
Poor record management can have severe consequences. If you’re habitually doing your books only when you’re drowning in receipts, you may forget what those receipts were for, fail to document tax-deductible expenses, or have troubles reconciling your bank accounts. Worse, you wouldn’t have a solid foundation on which to base your buying and investment decisions or have the necessary documentation in case of an audit.
To avoid getting into such a mess – or to resolve the issue before it gets worse – hospitality bookkeeping experts recommend doing your books on a weekly or monthly basis. However, if you feel the need to reconcile your accounts on a daily basis, you’ll be better off by outsourcing the work to a reputable accounting and bookkeeping services company.
Incorrect categorization of expenses
While hospitality bookkeeping and accounting experts can easily categorize different business transactions without even batting an eyelash, those without formal training may get confused or overwhelmed and do things like erroneously switching income and expense items or making incorrect entries in the company ledgers. This is quite understandable, considering all the different variations in food and drink costs, menu prices, room rates and rentals, package deals, housekeeping expenses, and other guest requests.
If you don’t want to risk making serious accounting mistakes that may eventually affect your company’s financial health or make you lose out on precious tax savings, consider hiring an experienced accounting and bookkeeping services provider. With a hospitality bookkeeping expert at your side, you can avoid all these costly mistakes and accurately gauge your business performance.
Overlooking sales tax and tax deductions
The taxman can be quite unforgiving, so you need someone to take care of collecting and reporting sales taxes. Otherwise, you may have to pay more than the tax due – or worse, be slapped with serious fines and penalties come tax time. Additionally, you’ll want to work with someone who can help you identify and track reimbursable expenses.
Since this task is extremely sensitive in nature, it can help to work with an accounting and bookkeeping expert. While hiring an experienced bookkeeper may seem to be a more expensive option than going solo, you’ll have someone who knows all the sales tax obligations and tax-deductible expenses in your particular niche.
Not separating personal and business accounts
As a rule, you should have a separate account for your personal and business activities and should avoid using one fund source to cover for the other. Mixing personal and business spending can only complicate things, especially when it’s time to prepare your taxes. Worse, it can make you personally liable for any outstanding debts your company owes. To keep everything in order and avoid future issues, avoid co-mingling your funds and reconcile your bank accounts on a regular basis.
Putting financial statements on the back burner
You wouldn’t understand how your business is doing if you don’t make reading and analyzing your financial statements a priority. Moreover, you may also be losing out on some significant revenue-generating opportunities if you just let your finances sit on your desk.
Financial statements are a great business tool. You can use them to spot emerging trends, gain financial insights, make smarter business decisions, manage your cash flow, and, in general, improve the profitability of the business.
Mismanaging petty cash
While bookkeeping experts recommend keeping a small amount of cash in your business checking account to cover for emergency business expenses, many hotel, bar, and restaurant owners have problems managing and keeping track of this money. If you’re one of them, try to design a system that will help you accurately track your expenses and where – and how – your dollar bills are being spent.
Improper employee classification
Hoteliers, bar and restaurant owners, cruise and amusement park operators, and other businesses in the hospitality sector use a combination of full-time and part-time employees and independent contractors to cope with the ever-changing labor demands in the industry. So, while it may seem like an additional task, you need to properly classify your workers or you’ll risk overpaying your taxes or being fined by the IRS.
Not having a backup
Nobody knows when a disaster will strike, so you need to be prepared. System crashes, multiple employee resignations, natural disasters, or other unfortunate events can jeopardize the stability of your business, so you need to create system backups to protect you against losing critical data.
Not getting professional help
Doing everything on your own will only get you so far. If you are serious in growing your business, focus on your core competencies and delegate the rest. Free up your time and do what you do best by outsourcing the extremely confusing and time-consuming bookkeeping tasks to the professionals.
By working with a capable accounting and bookkeeping services provider with ample industry experience, you can accurately track your numbers, manage your cash flow and business growth, file your taxes on time, handle audits, and avoid costly mistakes. Who doesn’t need one?
Increase Your Business’ Profitability with Hospitality Bookkeeping and Accounting Services
At BackOffice Solutions, our expert bookkeepers and accountants have decades of experience helping hotel, bar, and restaurant owners lower their expenses and improve their bottom line. Contact us today to learn more about our outsourced hospitality bookkeeping services and let us work together in growing your business.