Common Bookkeeping Mistakes to Avoid

Worried that you might have messed up your business’s books? Don’t worry because this is a mistake every business owner makes. Bookkeeping blunders are quite common, but it becomes difficult to catch them when they keep recurring. 

Small enterprises have a lot of passion for growing their business. However, they often fail to grasp underlying requirements. One of them happens to be bookkeeping, which, if neglected, will put your process in jeopardy. 

If you think that bookkeeping is fairly simple, give your finances a second look. Gather all your receipts, put them in order, find out how much you have spent on your business through your personal account. Find out the number of orders for which payment was not collected because the client wasn’t responding and the amount was very small. 

That’s just touching the basics of bookkeeping. Do you think you can do all this and more, along with handling other business responsibilities? If you can’t, you need to hire a professional, such as Gecko bookkeeping services in Brisbane. They’ll relieve some of the burdens you have been shouldering.

Following are a few bookkeeping mistakes that most small business owners make:

Forgetting to Save Receipts or the Small Amounts

Just because an order was less than $50 does not mean you should not save the receipt. The smallest amounts provide backup for tax deductions. You can create two folders marked “Small Expenses” and “Big Expenses.” Assign an amount to both folders and then add the receipts in them accordingly.  

Failing to Bring Together the Bank Statement With the Books Each Month

Good bookkeeping is found on making sure that your bank statement reconciles with your books every month. By doing this regularly, you will be able to pick up errors easily. Your bookkeeper will rectify the mistakes immediately and bring the finances back on track. Hence, we recommend you look into electronic banking because it integrates easily with accounting software.

Depending Too Much on the Accounting Software

Bookkeeping errors usually occur due to oversight. However, they can be detected easily by a manual edit. It’s not uncommon for businesses to use bookkeeping software. When the software option doesn’t work out, you need to look at the numbers yourself and find out why the bank statement and books are not reconciling.

For this reason, professionals like Gecko bookkeeping services in Brisbane manage bookkeeping manually and with bookkeeping software. Many companies also offer in-house training for clients so that if they choose to hire someone for bookkeeping and put them on their payroll permanently. When clients have bookkeeping knowledge, they won’t have to go through the hassle of ensuring their employee is the right for the job.

Not Knowing the Difference Between Profits and Cash Flow

The world of profit and loss is forever changing. Sometimes, positive cash flow in a short amount of time can be unprofitable. On the other hand, negative cash flow in the same timeframe can be profitable.

The former situation is quite common when you have to pay the supplier first before receiving payment from your client. You need to know where your business stands financially to get the full picture. So, if a particular order proves to be successful, don’t be in a rush to celebrate. Instead, make sure the books show it first.

Not Tracking Reimbursable Expenses

Have you ever paid for a business expense from your personal account? While we frown upon this action, we understand that this is sometimes unavoidable. As time passes, you might forget these expenses and not include them in your books. Hence, it becomes challenging to balance the books and bank statement. This issue will lead to lost tax deductions and money. To avoid this situation, make sure to track any business expenses paid for from your personal account so that they can be reimbursed. 

Overlooking Sales Tax

Some businesses neglect to note down sales tax. Not reporting sales and accounting tax is one of the biggest bookkeeping errors. This can lead to penalties from the ATO. Then, there’s the mistake of overstating your sales tax. Hence, it makes sense to have a bookkeeping professional in your team so your small business can have a great start.

To avoid misunderstandings, have a professional settle your books to get a clear picture of where your business stands financially, update them before and after every project, and transfer a set amount as salary into your personal account for daily living expenses.