As professional bookkeepers, you know that keeping your
financial ducks in a row isn’t always a walk in the park, but it’s essential
for the health of any business. Many business owners fall into common traps
that can lead to serious pain points down the track, and that’s where the
skills of a professional bookkeeper can empower clients. Let’s explore some
common pitfalls and how to steer clear of them.
Losing Track of Small Purchases
It’s easy to overlook those little expenses, but they can
add up fast! Many of us forget to record small transactions, which can throw
off our financial statements and tax deductions. The fix? Set up a system to
track all expenses, no matter how small. Consider using a digital receipt app
or get yourself a dedicated business credit card for all purchases.
Not Taking Advantage of Tax Deductions
Australian businesses often miss out on tax deductions due
to poor record-keeping. Even small business expenses can be tax-deductible, and
these can add up to significant tax savings over time. Stay informed about
eligible deductions and keep compliant records to maximise your tax benefits.
Haphazard Account Reconciliation
Reconciling the accounts monthly is a must for maintaining
accurate financial records. Many businesses make the mistake of reconciling
bank, merchant and credit card accounts infrequently, which can lead to
discrepancies and errors that become a real headache to sort out later. Set a
monthly schedule for reconciliation and address any discrepancies pronto.
Mixing Personal and Business Finances
This is a common blunder among Australian business owners.
Failing to separate personal and business transactions can create a right mess
when doing the bookwork, managing GST, and reconciling financial reports.
Encourage clients to open a dedicated business account and use it exclusively
for business-related transactions.
Incorrect Employee Classification
Misclassifying employees can land employers in hot water,
both financially and legally. Ensure your clients understand the different
awards and agreements under Commonwealth and state/territory law and that they
use the correct instrument to provide compliant pay, entitlements, and
conditions. Regularly review these employment instruments to avoid potential
issues and penalties.
Falling Behind on Bookkeeping Tasks
Consistent, up-to-date bookkeeping is crucial for
understanding an organisation’s financial health. Many businesses let the
bookkeeping slide, leading to inaccurate financial reports and cash flow
dramas. Consider implementing a daily or weekly routine for updating the books
or invest in cloud-based apps to streamline the process.
Neglecting to Prepare a Budget
A well-planned budget is essential for forecasting and
making informed financial decisions. Many Australian businesses overlook this
crucial step, leading to overspending and poor resource allocation. Create a
realistic budget that aligns with business goals and review it regularly. It’s
not a set and forget task.
Incorrect Data Entry and Classification
Inaccurate data entry or incorrect classification of
expenses can lead to skewed financial reports and tax issues. Double-check
entries and ensure the correct use of categories for assets, liabilities,
equity, income, and expenditure.
Failing to Back Up Financial Data
Losing financial records due to technical issues or
accidents can be catastrophic for your business. Many Australian businesses
neglect to back up their data regularly. Implement a robust backup system,
preferably using cloud-based solutions, to ensure financial information is
always secure and accessible.
Remember, sound bookkeeping practices can save your
clients time, money, and stress in the long run.
Sonya Farrawell, My CPE CEO