Common Mistakes in Bookkeeping – Part 1

Bookkeeping: A nuisance or necessity?

Basic

The New Year is upon and as we look forward to a prosperous year ahead one thing on many business ownersresolution list is to get their books sorted and find more time in their life.

Bookkeeping is a necessary and vital process in running your business but it’s importance is often overlooked. Many people initially try to manage it themselves to keep costs down but our experience is business owners quickly learn bookkeeping is something that requires knowledge and experience to get it right. When done well bookkeeping can be an investment in monitoring your business health.

In part one of this two part series, we look at the first six common mistakes in bookkeeping and provide ways to help you avoid them.

1. DIY Bookkeeping

It’s great to give something a go and try to control every aspect of managing your business but at what cost? In our experience, most people that try to manage the books themselves inevitably end up wasting valuable time, making costly mistakes and adding to their stress. By hiring a professional bookkeeper to do the day-to-day data entry, bank reconciliations, cash forecasts, payroll, creditors and BAS they can provide you with timely financial statements. With better, more accurate information at your fingertips you can make informed decisions that can help grow your business.

2. Using account software you don’t understand

There is a wide range of accounting software available today and the key question is are you utilising the right one for your business? While they may appear user-friendly, in most instances, there will be many features that you won’t be using or not using correctly. The other mistake people make is not having the right software appropriate to manage a business’ financial needs. A professional bookkeeper can help advise and install the right software for you, ensuring you avoid many issues.

3. Only checking cash-flow in times of crisis

Do you know your current financial position and what money you have access to for paying bills, financing new projects or purchasing assets the business needs? To avoid surprises due to poor cash flow management, have a bookkeeper keep up to date with your bank reconciliations and payment process as it will save you money, and certainly stress in the long run. By having a bookkeeper do regular bank reconciliations and cash forecasts, not only will you know your day-to-day cash position but you can plan for contingencies and new business development.

4. Discovering runaway expenses have eaten up the bottom line

Do you have a budget? Do you have a system to track receipts for expenses? Do you claim all the deductions you are entitled to? Are you categorising expenses and income correctly? A bookkeeper will be able to accurately enter and code transactions and prepare timely expense reports and income statements so you can spot and deal with expense over-runs early. You will know if your cost of sales and margins are in line with your business plan and projections.

5. Battling BAS

Is the dread of BAS time a recurring nightmare for you? The penalties for missing BAS statement deadlines and PAYG lodgements can be expensive. By hiring a bookkeeper who is a registered BAS agent you can reduce the liability of mistakes on your shoulders.

6. Doing invoicing as an after-thought

Invoice = Revenue = Cash-flow. It’s a simple equation yet a step in business that is often neglected due to lack of time. With the proper systems and disciplines in place, and using the right technology, you’ll invoice promptly – and maintain a strong cash flow. Your bookkeeper will get statements out early and run reports that alert you to overdue debtors.

A bookkeeper is the best way to minimise errors and maximise control with your finances. Call 1800 082 066 to talk to your local bookkeeper about how to better manage your business finances.

This blog is not intended to provide direct advice on the topic and First Class Accounts accepts no responsibility for those who act on its contents without obtaining specific advice from an advisor directly.

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