5 Bookkeeping Mistakes To Avoid This Financial Year

Here are the five most common mistakes many of us make when it comes to our bookkeeping and some strategies you can employ to save you time and trouble down the track.

1. Shoe-box or excel spreadsheet bookkeeping.

We’ve all been there; come home from work, emptied the wallet and throw the receipts in the in-tray for filing… later. The problem is that later often never comes. It is critical with the majority of transactions now occurring online, that you upgrade to a cloud-based digital bookkeeping system. A bookkeeper or accountant can set up your financial system as a whole for you. You want a total financial system that enables you to scan in receipts (goodbye shoe-boxes), run reports, and cross-correlate transactions directly from your bank account with manual entries and invoicing. You should also ensure you have a cloud-based backup system with multiple backup sites. These are things you cannot do with an excel spreadsheet.

2. Use your personal account for expenses and co-mingle your personal and business banking.

Keep your personal and business expenses and banking separate. It’s all too easy when you are out and about to reach for your personal card and either go about getting personal reimbursement or forgetting to do it altogether. Concerning bank accounts, it’s a red flag to any future creditors that you can’t get your finances in order enough to separate out the two accounts and hence you aren’t potentially reliable financially.

3. You don’t worry about getting receipts because everything’s on your online bank statement.

The Australian Taxation Office (ATO) requires proof for all business purchases. These must detail who the payer is, the amount paid and proof of payment. You need to keep receipts for all purchases for five years. Bank statements are not detailed enough. Often the business you purchased from is not the same as the trading name of the company you bought from, so then when you go to categorise the purchase, it’s difficult to remember what it was. Also, bank account statements do not detail what the expense was. The most efficient way to cope with receipts is by scanning them into your accounting software program or storing them in Dropbox.

4. You haven’t classified your employees correctly.

Many businesses operate with a mix of employees and contractors. It is imperative that you use the correct classification for each type of contractor. The ATO has an excellent tool to help you to determine which category your team members fall into.

5. You procrastinate over all things bookkeeping related.

Time is such a valuable resource and let’s face it, when you’re a small business owner, there is often, even more, to do with the limited hours. Allocating a small portion each week during the day to your bookkeeping and regularly updating your bookkeeper about your business will help ensure that you get to spend more time with your family and friends and less time staring at that pile of papers. Hopefully, these are a few simple measures you can adopt to make bookkeeping for this financial year a simple, effective process that ensures you get the maximum return in the new year. If you have any questions, or you would like us to help you set up a total financial system, please don’t hesitate to call on 1300 454 174.