Bookkeeping 5 Deadly Sins
By Travis Bacon
November 30, 2020
Bookkeeping is a tedious and often stressful task for business owners. The perceived mundane task of bookkeeping can often take up hours and hours. However, bookkeeping is often the secret weapon for running a successful small business. Correct and accurate bookkeeping can ensure that the business owners can effectively manage and expand our businesses.
Make sure you don't make these 5 Deadline Sins of Bookkeeping to ensure your businesses success.
Not Keeping Track of Receipts
Business owners are sometimes not aware of the requirement of keeping receipts for the purchases. Even when using digital accounting software like Xero or QuickBooks, a business has a statutory obligation to keep their receipts. Without a receipt, a business may not be entitled to claim GST or even a taxable deduction on the tax return.
ATO - Records required for your business's tax return – deductions
In the modern world, receipts should be stored digitally. Any decent accounting package today should have the ability to upload receipts & invoices to the transaction for easy record management. Talk to us today about using HubDoc with Xero to streamline your receipt management.
Mixing business and Personal Finances
When starting a new business, it may be convenient to mix business and personal finances together, even experienced business owners make this mistake. However, a business entity must keep its financial transactions separate from the owner's private dealings. The best way to achieve this is to have a dedicated bank account for your business.
The main goal is to avoid inaccurate financial information, which may lead to an audit by the Australian Taxation Office (ATO).
Inaccurate Financial Reports
Inaccurate financial reports lead to bad decisions by the business owners and ultimately puts the business success in jeopardy. There are many factors which can cause false financial statements, some simple mistakes include:
Incorrect transaction allocation;
Not recording transactions in the correct periods;
Unreconciled bank accounts.
An accountant or bookkeeper should be able to determine the appropriate reports and identify any issues in financial statements.
TaxDigital offers a free financial statement analysis meeting to ensure your accounting package and bookkeeping is up to scratch. To take advantage book in for a free one-on-one session with a qualified accountant here.
Late Lodgements
One of the biggest mistakes a small business can make is putting off the lodgement and payment of their statutory obligations (GST, PAYGW, Tax, etc.). By lodging on time, you may avoid the attention of the Australian Taxation Office (don't give them a reason to come knocking on your door). Besides, by staying up to date with your payment obligations, you ensure smooth cash flow for your business and avoid unnecessary penalties and fees.
Having streamlined bookkeeping practices in place will be especially crucial for the business owners to accomplish lodgement deadlines.
Not Invoicing customers Immediately
Cash is King!
As a small business owner, it may seem like you have no time to spare. Your more focused on doing your job than concerning yourself with the financial issues. By delaying issuing invoices by just one day, you risk being paid later or even worse, not being paid at all. Where possible a business should aim to clear their debtors (people who owe you money) as soon as possible. Collecting payment using an EFTPOS terminal is a great idea, failing that ensure you are issuing your invoices immediately upon completion of work and chasing your debtors weekly.
Remember the sooner you invoice, the sooner you will have the cash in your bank.