Seven Common Bookkeeping Mistakes To Avoid
While numbers generally don't lie, accurate bookkeeping is required in order to keep it that way - so what are some common errors to watch out for?
Bookkeeping is defined as the recording of financial transactions, and is one of the primary pillars of the accounting process in business. Transactions can include purchases, sales, receipts and payments by an individual person, or an organization or corporation.
The responsibilities of this process usually fall to a “bookkeeper”, who is generally accountable for providing accurate and up to date financial information about the business. As their reports usually go directly to business owners in order to help them make savvy financial decisions, it’s crucial that the information provided is flawless - so what are some of the more common errors to watch out for?
Seven Common Bookkeeping Mistakes To Watch Out For
Many business owners are of the opinion that accounting is a fairly simple process, and don’t give the required tasks the attention that they deserve. Poor accounting and bookkeeping practices can adversely affect the financial health of any organisation, and can even put businesses on the path to insolvency if not properly addressed.
In order to stay on top of the relevant bookwork, what are some bad practices or habits to ditch this year?
Business vs Personal - Do yourself (or your bookkeeper) a favour and actively separate your business and personal spending or banking. While it may be convenient to use your own credit card when on the run to pay for business expenses, it’s not a great bookkeeping practice.
Don’t Binge - Are you the type to cram four weeks worth of bookkeeping into a last minute Saturday morning binge at the end of the month? Don’t. This is a surefire way to make mistakes, and potentially make errors due to rushing, so stay on top of the paperwork regularly.
No Account Reconciliation - At least once a month, aim to settle your brand’s books with what your bank statement says. In the event that you spot an error, doing account reconciliation regularly makes it a lot easier to rectify as opposed to analysing a year’s worth of data.
Paper vs Electronic - Relying on the paper shoe box method inevitably sets you up for an accounting disaster, but so does relying on software that could potentially crash or be deleted. Instead, try to find a happy medium but using cloud based software with hard copy back ups.
Employee Classifications - Many businesses often have a combination of casual, part time and full time staff, plus contractors on top of that. Ensure that they are appropriately categorised in your systems to avoid headaches with tax, superannuation and leave entitlements.
Poor Petty Cash Management - Do you have your stash of petty cash readily available for multiple staff to dip into? While the amount is usually small in the grand scheme of things, mishandling petty cash is a recipe for disaster when it comes to reconciliations.
Not Enough Experience - As a small business owner, you undoubtedly wear many hats. If you don’t have the time or the experience to dedicate towards accurate bookkeeping, then at some point you need to weigh up the true cost of not allowing a professional to do it for you.
Sourcing Help With Bookkeeping For Your Business
If understanding your finances or the in’s and outs of doing business isn’t your strong point, then it may be reassuring to know that you’re not alone. In fact, many businesses (big and small) enlist the services of an accountant and even a business advisor to free up their time, while knowing that their financial obligations are already taken care of by the professionals.
At Muro, we are more than just accountants. We offer our clients strategic business advice and ongoing support to help them reach their business and financial goals, and have developed our services to ensure that our family of clients truly understand the numbers that we present to them. In turn, this allows them to focus on the things that they do best - great products, great services and ultimately, continuing to run a great business without sweating over the numbers.
We focus on getting our clients to look to the future of their businesses instead of taking a reactionary approach, and consider every business owner to be an entrepreneur. If you’re ready to think big and to get your bookkeeping sorted in 2021. We also have a dedicated in house bookkeeping solution helping you from inputting your receipts to reconciling your accounts to payroll. We are proudly a xero platinum partner and are at your service to help with the books. Please get in touch with us today at award winning Muro to ensure that you’re on the right path to success.