Common bookkeeping mistakes Small Businesses make
Bookkeeping is a significant part of any business endeavor. While it is typically not one of the more glamorous jobs, bookkeeping is at the heart of a businesses success and errors can cost the company significantly. You may be doing your own bookkeeping for your business or are just starting out on the own your own business journey.
Here are some common bookkeeping mistakes that business’s make with some practical advice:
- Not reconciling your bank accounts – This is a Bookkeeping 101 absolute must do bookkeeping task. Whether you do your accounts via running a manual cashbook or use software to assist with your accounts, ensure the bank accounts get reconciled regularly. Whether you do it daily, weekly or monthly, double check the bank account balance showing in your software or in your cashbook matches your actual bank statement. This ensures any accuracy of the data within your system.
- Not keeping all of your receipts and invoices – Ensure that every business receipt is kept so you can claim everything you can legally claim. There is a requirement of the IRD to able to claim for GST on expenses over $50 that a GST receipt be kept. If you create a good habit of keeping every receipt then you are in good steed for an audit. There is some great software that allows you to extract data and store copies of receipts and invoices online like Receiptbank.
- Forgetting to track reimbursable expenses. Small business owners often pay for expenses out of pocket or with their own personal credit card then make the mistakes of failing to track these expenses. They then fail to submit the expenses to the business for reimbursement.
- Have a separate account for your business transactions – Ensure you have all of your business related income and expenses running through a dedicated business bank account. Keep your personal expenses separate as much as possible. You are better to transfer funds from your business account to your personal account for personal spending rather than use your account for personal spending.
- Stay on top of your accounts – If you get behind in keeping your accounts up to date then this will have a detrimental effect on your business. Cashflow may become an issue due to invoicing not getting done in a timely manner, outstanding debtors not collected and bills not paid due to no funds. Ensure you have a daily or weekly processes in place for reconciling your bank accounts, sending your invoices and chasing up money due to you. This will set you in good steed and create great bookkeeping habits.
- Doing it yourself. No matter how much they hate it, many small business owners do handle the books themselves. Having a competent certified bookkeeper coming in to handle the books or reviewing them on a monthly basis can be extremely beneficial in that they have the skills to do the job quickly and efficiently and will provide a second pair of eyes to find errors and make suggestions. This then frees up the business owner to work on the business rather than in it.
- Not so great filing techniques – A shoe box may hold all of your receipts, but it can be a mission and costly to organise. Keep things nice and simple by either using a ledger, exercise book or even better, a cloud based accounting system such as Xero and Receiptbank. It is way easier and simpler to keep your accounts up to date each month than face a major stress out and many long hours at the end of each tax year.
If you might like some assistance with your bookkeeping, or ideas to set up a system that makes it easier for you, then contact the team at Ontrack Bookkeeping we are here to help.