Small businesses, and even medium-sized companies, tend to operate on do-it-yourself mode. They take on several roles to cut down costs and in doing so, end up with making several bookkeeping mistakes. What are the common bookkeeping mistakes that businesses make?
We’ve compiled them here so you’ll know what to avoid.
Common Bookkeeping Mistakes
Here are some of the most common bookkeeping blunders:
- Not managing your cashflow. Overestimating your account or not allowing enough funding into it will complicate operations and compromise your cash flow. A simple bookkeeping system will help you know what bills need to be paid and who owes you money so you can manage your cashflow well.
- Not keeping track of small expenses and losing receipts. Small costs add up. If you don’t keep track of them, you’ll find yourself with a big hole in your books and not compliant with ATO record keeping.
- Failing to recognise significant expenses and writing them off as small ones. Business owners often write off small expenses to General or Miscellaneous expenses. Doing this makes it difficult to actually see what is costing the business money and what expenses are unnecessary.
- Not making time for account reconciliation. It would be best if you reconcile your bank statements with your books as regularly as possible. This way, it’s easier to call the bank for any imbalances.
- Not separating your personal expenses from work expenses. This complicates the bookkeeping (making it more expensive if you hire a bookkeeper) and makes it difficult to know how much the business actually pays you. You should develop a strategy for earnings management. Doing so will let you determine how much profit you are actually making and how much you can pay yourself.
- Poor understanding of books and too much reliance on accounting software. Having an automatic system that does all the balancing for you is fantastic but deceptive. The computer does not know how to categorise or code your business information and if not set up and managed correctly will create a huge mess. And once things don’t add up, you wouldn’t know where to begin to fix it.
- Not prioritising bookkeeping. DIY business operations often underestimate how much time accounting requires and either don’t allot enough hours to consolidate their expenses or just leave everything to the last minute. This leads to more mistakes, financial disparities, headaches, and stress.
Avoid These Mistakes With Additional Business Concepts
As a business owner, dedicating time for bookkeeping is difficult. Do yourself a favour and call us today at Additional Business Concepts for professional bookkeeping solutions. We look forward to hearing from you!