Small and medium-sized businesses have a strong desire to grow, but they frequently fail to understand the fundamental requirements. One such issue is bookkeeping, which, if not addressed, may jeopardize your business operation.
Many business owners believe that accounting is a straightforward procedure and does not give it the required attention. Poor accounting and bookkeeping procedures, on the other hand, can hurt the financial health of any organization. In many situations, persistent bookkeeping errors might lead to your company’s collapse. Here at New Wave Accountancy, we spot plenty of accounting mistakes made by countless small businesses in Australia, which is why we’ve compiled the most common ones so you can avoid them and do better.
1. Losing Track of Small Purchases
Even the most seasoned business owners occasionally fail to keep track of their financial activities. While it may not seem like a big deal if a meal ticket goes missing, these modest expenditures may add up quickly if they are disregarded regularly. You also don’t want the government breathing down your neck to see whether you’ve claimed expenses and don’t have any documentation to back them up.
2. Not Taking Advantage of Tax Deductibles
Poor bookkeeping might cause you to miss out on tax deductions. A piece of printing paper is an outlay of funds, but the printer you purchased is a valuable asset. The latter can qualify for depreciation in your books, thereby lowering your tax liability.
Similarly, modest expenses that are tax-deductible may go unnoticed owing to simple bookkeeping errors. Often, these nominal costs add up to hundreds of dollars. Such a sum can significantly reduce the amount of tax due and save your business plenty of dollars in the long run.
3. Reconciling Accounts Haphazardly
Every month, you must reconcile your bank accounts. If there are discrepancies between your monthly statements and your books of accounts, make sure you get to the bottom of the issue. The majority of problems can be handled with a few minutes of inquiry.
However, if you reconcile once every few months, the work will grow enormous and virtually impossible to accomplish. Do it once a month rather than when shame compels you to.
4. Missing Out on Invoices
Invoicing is an essential element of cash-flow management and is prioritized by every bookkeeper. However, most business owners find it difficult to receive payments on time. Bookkeepers typically contact clients to remind them to make their payments on schedule.
They explicitly notify customers of the late charge clause in the event of a delay without seeming pushy. New business owners frequently miss these aches and pains, resulting in late payments that disrupt cash flow into the business.
5. Buying Accounting Software They Can't Understand
Some software packages are too complex for most business owners who are unfamiliar with double-entry bookkeeping. Subsequently, you’ll likely find yourself with a”shoe-box” full of material that will either expose you to danger in a tax audit or force your accountant to spend extra time and money sorting out.
These are only five of the most typical errors, but there are many more committed by business owners that do small-business accounting. These five issues especially will require a significant amount of time and effort to correct. They also pose the danger of leaving your accounting files useless, which will cost you a considerable amount of money when you take it to an accountant to have your tax returns/financials done.
Are you looking for quality bookkeeping on the Gold Coast? New Wave Accounting is the best choice. We’re the leading providers of end-to-end accounting and bookkeeping services that help you scale your growing business. Contact us today to learn more!