Although bookkeeping is a crucial component of business operations, many business owners make mistakes. This affects the accuracy of financial information used to make informed business decisions. On the other hand, bookkeeping errors can cost penalties from the ATO.
Now that we are approaching the end of the financial year, pay attention to these 5 bookkeeping mistakes you might be doing in your business.
Not having a regular check on books
It is one of the common mistakes business owners make often.
A regular check on books provides you more time to conduct a financial health check, review errors in statements, and reduces the burden of preparing financial statements at the last minute. Up-to-date financial reports keep you on track with your business performance.
To avoid completing those books at the last minute, include checking books on your priority list. Plan your day to improve your daily productivity. But if your day-to-day responsibilities make it impossible to do so, it may be the best time to consider bookkeeping services.
Failing to attribute private and business expenses properly
Combining personal and business expenses can get you into the bad books of the ATO. This can cause missing claims from your business expenses.
Here are ways to avoid mixing your personal from business expenses:
- Organise business receipts in chronological order and as soon as you made a transaction. There are software applications that let you capture and store receipts, invoices, and other supporting documents electronically. If you are always on the go, there are also mobile applications that make it easy to secure these documents digitally.
- Have a separate credit card for your business. This reduces the confusion when organising books and financial reports.
- Define what is and isn’t a business expense. Here is a resource from the ATO website to guide you.
No proper employee records
Keep the full list of requirements for maintaining employee records for at least seven years. The Fair Work Act requires a range of information business owners must keep. These include, but are not limited to:
- General information (ie. employer’s name and ABN, employee’s name and TFN, commencement date, and basis of employment)
- Pay records (ie. pay rate, bonuses, loading or penalty rates)
- Hours of work records
- Leave records
- Super contributions
- Termination records
Using programs that require bookkeeping expertise
Bookkeeping mistakes happen when business owners access software without the depth of bookkeeping knowledge and expertise. Having a qualified bookkeeper do this task helps you:
- Save time from recording and managing accounts
- Avoid costly errors
- Classify information efficiently
- Reduce time in expensive training courses
- Quickly get your books in order
If you haven’t yet, it is worth hiring an experienced bookkeeper and a registered BAS agent. This saves you from worrying about expensive mistakes. Here are the 6 benefits of hiring a registered BAS agent.
Not reconciling records to bank statements
Your bank reconciliation is one of the first things your accountant and tax auditor will review. Non-reconciled records can lead to:
- Spending more time analysing records
- Paying more than necessary to the ATO
- Raising suspicions on tax auditor to look into your affairs for poor record-keeping
This is when having a qualified bookkeeper gives you a huge advantage. An experienced bookkeeper can easily spot mistakes that could range from sending a transaction to the wrong account or missing transactions entirely.
Make it a habit to reconcile records to bank statements at the end of each month with your bookkeeper. This lessens the burden of keeping up with EOFY tasks.
Looking for a qualified bookkeeper?
Focus Bookkeeping provides quality bookkeeping and BAS services for many businesses. We offer solid business advice to ensure you understand your business’s financial and obligatory perspective.