6 Bookkeeping Mistakes Philippine Businesses Should Avoid

Every business should keep up with their bookkeeping and accounting functions.

Although this might not be the most fun aspect of running a business, it is essential to getting an accurate picture of your company's financial health. Businesses who don't take bookkeeping seriously enough increases their risks of encountering many different problems.

Below are some of the more common pitfalls you must avoid.

Doing your own accounting.

Small business owners typically take charge over most aspects of their business, including bookkeeping. This is reasonable at first, especially if you have basic knowledge of bookkeeping and accounting.

However, as your business grows, the requirements become more vast and complicated. This will require you to hire an in-house bookkeeper or to seek professional advice from consultants who provide accounting services in the Philippines.

Poor petty cash fund management.

There are usually some random purchases that businesses have to make that require to be settled in cash immediately, and this is where a petty cash becomes handy. But, what some companies fail to do is effectively monitoring it—not knowing where these resources are being utilized.

This sometimes ends up being unrecorded in the books, which can put a strain on your budget. Avoid an unbalanced fund by setting a fixed amount of your petty cash fund. Once it runs out, record and classify the expense transactions and replenish the fund.

Insufficient or incorrect supporting documents.

Some people make mistakes in providing inadequate or incorrect supporting documents for certain transactions. This is commonly experienced on purchase orders, delivery receipts, and receiving reports.

Insufficient or incorrect documents result in delays in the expense reporting.

Throwing away receipts.

Businesses must always have copies of all their financial transactions and purchases for the year. Receipts are proofs of these purchases, making it vital to organizing them correctly and filing them judiciously. These are particularly essential to show auditors—in case an audit check is needed.

Non-recording of reimbursable expenses.

Business owners sometimes make out-of-pocket expenses for the business using their personal credit cards or checks. These should be reported and recorded so that the owner can be reimbursed accordingly. If not, it would result in overstating the business' income in the books. 

Untimely liquidation of advances.

One of the most abused accounts is the Employees Advances because the borrowers usually fail to settle them on time. To avoid this, you must develop a policy regarding timely settlement of advances.

Failure to adhere to the policy should allow you just to deduct it from their salary.

These are just some of the most common mistakes that business owners usually commit. However, you can avoid them by ensuring that you have a sound bookkeeping background

At the same time, don't hesitate to get professional help when needed to avoid major financial mistakes.


Author's Bio:

Danella Yaptinchay is the managing director of Full Suite, a service company providing back end support to small businesses. She is a cofounder of Co.lab, a coworking space, and of the media company Homegrown. In constant pursuit of balance and self-development, she tries to apply the practices of yoga to her daily life.