Running a new business is exciting, challenging and fulfilling. It can also be stressful especially when you are juggling many balls in the air all at once, being everything to everyone at times.
Besides having to attend to marketing, customer service, improvement of products or services, keeping tabs on your business revenue, expenditure and cashflow, and just making sure that your business finances are in order takes a lot of time and effort. There are never enough hours in a day to do everything.
Needless to say, bookkeeping should be a priority for every business owner. As tedious and time consuming as it is, ensuring that your books are in order can be the difference between making or breaking a business. It can be the difference between making a profit or losing your investment in the business.
Here are our top 3 picks of common bookkeeping mistakes which you should be aware of:
- Not separating business and personal bank accounts
For small business operations, it is easy to assume that operating your business with your personal bank account is ideal or a temporary measure until you find time to make a trip to the bank to set up a new business bank account.
However, during a tax audit by ATO, not having that separation between business and personal bank account can cause issues and a lengthy investigation, not to mention additional fees from having to engage a bookkeeper/accountant to assist with sorting this out.
- Lack of record keeping
Another common issue is lack of record keeping of receipts and invoices. In the busy-ness of running a business, it is easy to lose receipts or omit to request for receipts for small expenses. The use of various apps including HubDoc or Xero files can make this easier. It simply involves taking a photo of a receipt and sending it to HubDoc or Xero via email, using your smartphone while on the go. Another failsafe way would be to place all invoices and receipts into a box or folder, ready for your accountant or bookkeeper to reconcile these into your accounting software.
Maintaining accurate records on a monthly basis and with a proper filing system can save you time and money on your income taxes. Failure to have receipt for expenses above $75 (or $82.50 inclusive of GST) may result in those expenses being disallowed as deductions in the event of a tax audit by ATO. That could cost you thousands in tax dollars and penalties.
- Mis-management of petty cash
While a petty cash float makes it easier to handle small amounts of day to day expenses, it sometimes inadvertently becomes the business owner’s personal wallet when expenses are properly tracked or change is not deposited back into the petty cash register. Recording ins and outs into a small booklet and placing receipts in a folder next to the cash register will go a long way in helping to track the funds. Regular cash counts will also help to minimise the chances of huge discrepancies.
Disclaimer: This blog post has been simplified to cover some key points of the importance of having a professional handle your bookkeeping work. This should not be construed as advice from Glint Accountants. There are many other factors to be considered and each business situation is unique. Therefore, we encourage readers of this blog post to contact Glint Accountants for assistance with their specific circumstances.
Geraldine Lee is a Fellow of CPA Australia and successful business owner with experience with all of the above. Contact us at Glint Accountants for assistance if you are new to running a business and need assistance with bookkeeping, set-up of Xero or training on how to use Xero. We are able to assist with Payroll set-up, Single Touch Payroll (STP) lodgements, PAYG withholding & BAS lodgements.