Common Mistakes in Bookkeeping – Part 2

January 30, 2013

Last edition we covered the first six mistakes in bookkeeping that covered everything from DIY bookkeeping to the issues with invoicing at the last minute. This week we will be looking at the last six steps in ensuring you avoid the most common mistakes.

7. Cash-flow – the lifeblood of business

If your cash-flow is not monitored, planned and predicted it can have a very negative impact on the success and viability of a business. By relying on your bookkeeper to prepare regular bank reconciliations, as well as monthly historical cash-flow reports and rolling cash-flow projections, you will enjoy a sense of confidence and feeling of being in control. It will enable you to make contingency plans if necessary, rather than being forced in to crisis management.

8. Working hard but not letting your capital work for you

Are you managing your working capital? As this term implies – if you don’t manage each element that increases or reduces your available working capital, your solvency may be at risk. Having your bookkeeper provide regular dashboard reports – on cash and bank positions, projected inflows and commitments – puts you in control.

9. Chasing sales not margin

Too many businesses today are simply chasing turnover as they struggle to keep their heads above water. Often that turnover is achieved at minimal margin or gross profit, or even at a loss. Without regular job cost and profit and loss reports you’ll be running blind, hoping for the best.

Your professional bookkeeper will structure your chart of accounts so that fixed and variable costs can be identified. You will be able to identify your break-even and the margin you need to achieve for profitability. The monthly P&L reports will highlight deviations from budget so you can evaluate the necessary remedial action.

10. Drowning under the stress of payroll

Often payroll is the most significant element in a business’s cost-structure. Are you confident that you are meeting all your obligations toward your staff? Ask yourself some of these questions.

Are you paying the correct award and penalty rates?

Are you in compliance with your super guarantee obligations?

Are you confident that you are correctly accruing annual and long-service leave entitlements?

Do you have systems in place for rostering and processing time-sheets?

Employees are not merely expenses – committed, happy and productive employees are your best assets. The right payroll system properly administered by a professional bookkeeper can ensure you comply with your statutory obligations.

11. Finding that life is full of surprises

Avoid those unwanted surprises that running a business can throw at you and take control, not only day-to-day but for the long-term. By working with your bookkeeper you can translate your plans and vision for the business into a realistic budget that can be loaded in to your accounting software and form the basis for monitoring your performance.

12. Hoping and not planning for the future

While working in your business may be doing what you love, your ultimate goal will be for the business to provide the lifestyle you seek, provide the security you want for your family, and to secure your retirement. By knowing the cost structure of your business, and the drivers of revenue and profitability, you can put in place the planning necessary to achieve your long-term financial goals.

Maybe some of these mistakes apply in your case and you may have had some ‘light-bulb’ moments from our suggestions. If so, don’t be hard on yourself, like most small business owners you are probably stretched too thin. Bookkeeping is not an afterthought or to be attempted with your left-hand while you try and manage the business with your right. You will find the services of a trained, professional and accredited bookkeeper the best investment you can make for your business.

Call 1800 082 066 to talk to your local bookkeeper about how to better your business management or click here to download the 12 Common Management Mistakes in Bookkeeping for Business book in full.