Did you know that social media influencing is the fastest-growing profession in 2023? Being an influencer, content creator, or small business owner means you have:
- Unlimited creative freedom,
- Flexible working routines, and
- Independence and control over what you do!
Plus, you get a good amount of money rolling once you reach a certain point. But when the money starts rolling in, so does a complicated bookkeeping process.
Many budding creators and small businesses try to DIY their financial reporting, not realizing their mistakes till it’s too late! So let’s take a look at some of the biggest bookkeeping and accounting mistakes you might be making and accounting tips to fix them.
5 Small Business Accounting Mistakes You’re Probably Making
Accounting mistakes are often hard to find as a business owner and will end up costing you a fortune! But when you’ve got fluctuating income, these setbacks can cost you your future.
Look out for these financial issues and you’ll be good to go:
Failing to keep track of your receipts and invoices
Are you grasping at ends around tax season, not knowing why things aren’t adding up?
Being an influencer or content creator on social media means you’re dealing with product sales, affiliate programs, sponsorship, and a few other income streams. Failure to record these receipts as soon as they come can cause you to undervalue or overvalue your income, leading to money issues come tax time.
Similarly, not tracking your invoices can cause serious cash flow problems that can make you vulnerable to financial insecurity, even if you’re making tens of thousands a month.
Did you know that there are numerous business transactions that you could get written off during tax season? From traveling to shoots and sponsorship meetings to accommodation and food during these travels, recording these in your books with bank statements can help you save money with tax deductions!
During an audit, the lack of proper documentation can also make it incredibly difficult to prove the legitimacy of transactions and expenses, leading to further scrutiny including tax penalties by the IRS.
Slacking on bookkeeping
One of the major accounting mistakes new business owners and content creators make is slacking on their bookkeeping duties. If you’re very intent on using some fancy accounting software or having physical ledgers to record transactions, consistency is key.
Whether your daily transactions are small or large, they should be recorded and categorized. And this holds true for an influencer with 1000 followers or 2 million followers.
Bookkeeping practices aren’t only crucial for filing your taxes, but they are also necessary to show your financial health, cash flow, and profitability.
If you’re maintaining your books quarterly, a lot of receipts and invoices might go missing which leads to unclear financial insights and tax penalties. You might also miss out on important billings that were never paid, causing you to stretch thin with money issues.
Combining your personal and business finances
One of the biggest mistakes new business owners and influencers make is using the same bank account for personal and business finances. It’s understandable when you’re just starting out in your industry. But give it time and it will torpedo everything you’ve built.
Over 25% of small business owners and creators don’t have a separate business bank account.
Because of this, you’re unable to see the full image of your business’s financial health. You don’t know if you’re profitable or if your personal savings are covering up a loss. There’s no accurate way of finding out a financial hole in your bookkeeping if all your transactions are a confusing tangled web.
If you want to grow your business by acquiring external funds, combined finances will alert potential investors and lenders. These entities are looking for a clear and complete overview of your business’s financials as well as history as they consider your application.
In fact, over 70% of small business owners without a business account were denied by lenders in 2018.
Combining both types of finances in a single bank account can also complicate your bookkeeping and reconciliation process when you need to close your books for the year.
When tax time rolls around, it becomes challenging to distinguish business transactions, and you might miss out on valuable tax returns!
Hot tip: Separate business and personal accounts at the same bank. This way, you might receive some attractive incentives from the bank!
Classifying employees and contractors incorrectly
Unlike giant corporations, small businesses, and solopreneurs rely on freelancers, contractors, and part-time and full-time employees to run things smoothly. And this is where business owners make a big mistake…
They classify their employees under the wrong terms.
Because of this, the state and federal governments can’t calculate payroll taxes on their end and a lawsuit comes your way along with an expensive penalty. In worst-case scenarios, you’ll also have to reimburse your employees by covering their:
- Social Security,
- Unemployment,
- Medicare tax, and
- Payroll!
So, go over your employee list and classify them as either an employee or a contractor. Next, you want to have them fill out the correct forms. A contractor gets a W-9 form while your full-time employee would complete a W-4 form.
You can figure out your employee’s status with this helpful table:
| Employee | Contractor | |
|---|---|---|
| Working hours | +40 hours/week for full-time, 20 hours/week for part-time | No specific hours, flexible |
| Benefits | Yes | No |
| Pay method | Salary | Project-based, fixed-rate |
Not hiring an experienced accountant
If you’re in the influencer industry, chances are you’re more creative than a certified financial officer (CFO) and also more likely to make mistakes that lead to financial problems.
Many businesses and influencers often try their hand at maintaining their financial records, tracking income and expenses, and doing their own tax planning!
But how confident can you be in your accounting system and practices? Are you properly reconciling your accounts? Are you up-to-date with the latest business tax laws and regulations? A single mistake in calculations or outdated practices can cost you more than you’ll save from not hiring a CFO or CPA.
So, always make sure to hire an accredited accountant and bookkeeper to keep your company’s finances in check with good accounting practices. Or at least, improve the financial health of your business by avoiding accounting mistakes that can derail your successful business!
Keep Common Bookkeeping Mistakes At Bay
Being in the influencer or small business industry as a solopreneur can be exciting and rewarding.
Until it’s time to start tracking your financial information, money problems, profit and loss statements, and the tax season. That’s when you’ll come across significant consequences for common bookkeeping mistakes you simply overlooked.
Now, you know just which accounting mistakes to avoid and stay on top of your game!
Destress Financially With Stanton Financial Co.
If you want to dive head over heels into being the creative mastermind of your brand, Stanton Financial Co. can help you.
Stanton Financial Co. is a premium bookkeeping and CFO service that brings big business strategies to small businesses, solopreneurs, influencers, and content creators.
Unlike most bookkeeping services, we make it easy for you to profitably manage your fluctuating income. Collaborate with brands and focus on doing what you do best– we’ll take care of everything else!
