Resources

Bookkeeping, as mundane as it may appear, is actually your biggest secret weapon when it comes to business management and growth. It is only with accurate and consistent measurement of a company’s financials and other key indicators that we as business owners can effectively manage and expand our businesses.

Here are the most common bookkeeping mistakes you need to avoid:

Not separating business from personal.

Not having separate bank accounts for personal and business activities can become an issue. Not only does it cost you money and time having to separate the two, but if you are audited, you may need to provide complete records of business-related activities that are separate from your personal expenses. Make sure that your bank statements are properly reconciled every month. This will help to minimise errors and identify potential issues.

Claiming GST Credits with no receipts.

Many businesses have small expense transactions of less than $100 and think they can just allocate it to an expense and claim 10% GST. It’s important that you retain the right documentation to support any GST credits you claim. Not only is it a requirement of the ATO but not everything has GST so if not aware you could be over claiming or under claiming without a receipt. Knowing the rules not only allows you to claim these credits which can add up over time, but save you money and potential fines in the long run.

Improper or poor record-keeping.

Improper or poor receipt and record keeping is common for businesses. It is easy to lose receipts or forget about those small expenses that seem insignificant. Maintaining accurate records is imperative. With the ability to keep receipts and tax invoices in the cloud and attached to transactions through online accounting systems, not only can it save you time and money, but if in the case of a potential audit, accurate records of income and expenses could end up saving even more.

Trying to do it all yourself.

Many business owners try to do bookkeeping themselves or do not have the professional help they need. Although we all know that time is money, many business owners do not put enough VALUE on their time. How you value your time is extremely important to your business. Leave the tedious and time-consuming task of bookkeeping to the professionals. A bookkeeper will know what to record, how to record it, and most importantly, the accounting changes that affect a business on an ongoing basis. This alone can not only save you time, but it also frees up more of your time so you can focus on growth and taking your business to the next level.

Incorrect classification of data.

If you or someone you have hired does not have the knowledge of correct best practice in bookkeeping, this can become a problem. Accurately tracking income and expenses in the correct chart of accounts ensures proper measurement of profitability. Knowing the different tax codes of each income and expense account can result in significant tax savings, as well.

Neglecting to track reimbursable expenses.

Many small business owners pay for expenses out of their personal funds. As time passes, there is increased risk that these expenses get overlooked. Failure to account for these reimbursable expenses can result in lost money as well as lost tax deductions. Create a policy to make it easy for the company to easily and consistently track and record reimbursable expenses.

Neglecting reconciliation of bank accounts.

Reconciliation is the significant task of making sure that your bank statements are in line with the accounts. It is also beneficial in finding the mistakes in the books and detecting any frauds being committed by employees or third party entities. Reconciling should be done regularly without fail.

Failure to record small transactions.

buying a locked petty cash tin and obtaining retaining receipts for all disbursements is a great way to start.

Now that you have read through the most common bookkeeping mistakes, take a look at your business and determine whether any of these apply to you. Now is the time to make some easy changes to upgrade your bookkeeping system and turn that mundane task of bookkeeping into your secret weapon for business management and success! If you need any help, feel free to contact us.