We have noticed, in our years of consulting, these ten mistakes seem to be a recurring theme among business owners that “try” to do their own bookkeeping. #10: “Unless you have the skills and time, don’t keep the books yourself. No matter how much they despise and avoid the task, many small business owners insist on doing it themselves” Find a qualified bookkeeper that is detailed orientated and meet with them on a regular basis. ~ Sarah Nance, CEO All Star Accounting (www.allstaraccounting.net)
For many small business owners, bookkeeping is a part of the business that is often overlooked, or left until the last minute.
Bookkeeping is a task that many business owners hate doing, and is often rushed, left to the last minute, or carried out late at night after a hard day at the office or on site
Simple bookkeeping mistakes can become very costly, sometimes even thousands of dollars- cash that would be better seen in the bottom line. Incorrect bookkeeping can expose owners to substantial fines if discovered by a Tax Office audit
Top Ten Bookkeeping Mistakes
1. Not Separating business and personal funds.
Don’t mix business expenses with personal finances.
2. Leave an audit trail.
Record keeping will be much more effective and accurate using a bookkeeping system to easily and quickly retrace your company’s financial activities.
3. Ensure that bank and credit card statements have a month-end cutoff.Synchronizing the bank and credit card statements with the monthly cycle makes it easier to track expenses and reconcile accounts
4. Use a computerised accounting system
– or hire a bookkeeper to do it for you. Accounting software makes it easy to track income and expenses, produce monthly reports etc
5. Save receipts
Save receipts for all purchases, even those for purchases less than $75. While such receipts may not be required by the ATO, they serve as the perfect backup documentation for the many deductions you may claim.
6. Tracking reimbursable expenses.
Most small business owners pay expenses with personal funds or a personal credit card.
7. Reconcile the books with bank statements.
Reconciling the books is an important part of bookkeeping
8. Remember funds collected as GST is not sales income.
If you charge GST , you’re a tax collector for the ATO – it’s not your money to spend!
9. Petty cash.
Many businesses are careless with petty cash.
10. Don’t keep the books yourself
Unless you have the skills and time, don’t keep the books yourself. No matter how much they despise and avoid the task, many small business owners insist on doing it themselves
How valuable is your time?
What else could you be doing to grow your business instead of doing your own book-keeping? A plumber may earn $80 per hour, but he can’t earn that if he’s spending 4 hours doing something that may take a professional bookkeeper less than half that.
So he has to weigh up $320 of lost income vs. $100.