You’re not alone. As a small business owner, you are always juggling many balls at once – from marketing to sales to customer service. You know that bookkeeping is important but it doesn’t have the same urgency as all of your other tasks. Some might say that’s because they can hire someone else to do their books for them (and usually should). But even if you outsource your accounting needs, there are still some common mistakes that every small business owner should avoid when it comes to bookkeeping.
Below are some of the most popular errors business owners make when they keep their books.
Not paying on time
Forgetting to pay your bills on time because they are too far down on your list of priorities.
For example, if you did not pay your employee’s super by the due date you need to lodge a superannuation guarantee charge statement with the ATO and pay the required amount. You‘ve to show them you’re making an effort to meet your obligations to avoid penalties.
We’ve seen businesses that are continually paying late fees of $15 to $25 on top of their bills because they’re not keeping track of them.
Not keeping track of cash flow
To properly manage a business, we must take care of the most important aspect – money. You can’t measure what you don’t know and cash happens to be one thing that’s very hard for people in small businesses to keep track of.
They’re not keeping an eye on where their income comes from and how much they’re spending every day.
Some businesses are unknowingly paying a hefty monthly credit card interest because they haven’t paid off their monthly balance and yet have cash sitting around in an account.
DIY Bookkeeping
Many small business owners still handle their own books or hire family members to perform the tasks. These can be: data entry, accounts receivable, accounts payable, bank reconciliation and may be payroll.
We must understand that Bookkeeping is a vital part of running a business. DIY bookkeeping can be overwhelming if you’re also handling marketing and office management duties.
Each business is different but this bookkeeping checklist will give you some ideas on what needs to be done. Use it to adapt it to your business. Make sure to consult with an accountant or a BAS agent for at least during the setup stage.
The setup phrase
Before any bookkeeping procedures, ask your tax accountant about the business structure and whether to register for GST.
1. Choose an accounting software that suits your business needs
2. Set up a Chart of Accounts (COA)
3. Enter employees information for payroll
4. Enter inventory if you’re selling physical products
5. Set up bank feeds to your accounting software
6. Set up separate bank accounts for business and personal transactions. Your business’s money is not your money (YET)!
Bookkeeping checklist
Depending on your volume of transactions, you need to work on your books at least once a week to keep up to date.
1. Reconcile bank and credit card accounts in the software system against bank statements
2. Follow your system for handling Accounts Payable (expenses)
3. Follow your system for chasing Accounts Receivable (your customers’ invoices)
4. Enter bills into the system
5. Invoice customers as soon as possible, considering the nature of the business
6. Process payroll. We prefer fortnightly processing as to weekly, it just saves you lots of time.
7. Submit Super and BAS. Most likely small businesses are required to submit these payments quarterly.
As you can see, bookkeeping is quite involved. There are many technical aspects that need to be done correctly in order for the business not to run into problems with noncompliance issues.
A common and costly bookkeeping mistake we’ve seen is that some businesses left their books unchecked for months, which led to customers owing them overdue money and being late on tax lodgements.
A good bookkeeper is worth their weight in gold because they can help take the headache out of managing your finances. They will also offer insight into areas where you might need more assistance as well as provide management advice on things like inventory control or payroll that could improve operations overall.
