The most common bookkeeping mistakes business owners need to avoid
Six common bookkeeping mistakes to avoid
We highlight the most common mistakes made by SMEs that need to be avoided to ensure the success of their business. With the increase complexity of accounting, compliance and bookkeeping processes, business owners juggle to keep their business profitable. During these challenging times especially, it’s easy to understand where some small and medium business owners will make mistakes with the financial aspects of their business.
- Lack of time invested in the bookkeeping process
Accurate and compliant accounting and bookkeeping is crucial to the success of a business. This includes making sure each financial transaction, regardless of the size, is correctly recorded in your accounting books. All payroll and tax obligations must be met and must follow the relevant legislation. Whether undertaken by the business owner or someone else, these processes will take commitment to ensure the accuracy and completeness of all your transactions, and due diligence on the part of the business owner. Whether your business is big or small, a complete and accurate set of accounts can provide you with valuable insights into the financial health of your business.
- Not performing account reconciliations
Performing account reconciliations can be simple if you regularly keep on top of it. This involves comparing your general ledger transactions with the bank statements. Reconciled accounts ensure that bookkeeping errors are rectified on a timely basis before they result in significant issues for your business.
- Not managing your budget
A primary reason why small businesses fail is because they start projects without a budget, and regularly reviewing it. Without a budget, many businesses fall into the trap of spending more money than they intended. Neglecting to set and manage a budget can make it very difficult to understand and control your business expenses. Businesses may forego opportunities if they don’t fully understand how much funds are available as opportunities arise.
- Cash Vs Accrual Accounting
Cash accounting may seem like a more straightforward method of accounting, but it has its drawbacks. It may not give an accurate picture of your financial performance. For example, your business may appear to be profitable when in fact, many outstanding bills haven’t yet paid. It also does not provide a long-term view of your finances, making it difficult to make wise business decisions. Accrual accounting provides a more accurate view of the financial health of your business and will help with making strategic business decisions. This will also help when setting and maintaining a budget and forecasting.
- Trying to do it all
At the start of the business, many small business owners will perform many roles within their business to save costs and keep everything within their control. However, it’s vital that even from the start-up phase, bookkeeping and accounting functions are undertaken by qualified bookkeeping and accounting professionals who can ensure your business is set up correctly from the get-go. This also frees up your time to focus on the core of your business and make it profitable. This will also save you time and money in the long run as you will avoid any costly mistakes.
- Combining personal and business expenses
Business owners need to separate their personal and business finances. An efficient way to separate your personal and business expenses is to divide them into separate, designated bank accounts. Similar to a separate account for your business, a business credit card helps maintain records by clearly defining what is a business expenditure and what isn’t. This will also help create a clear line between business and personal capital should any legal issue arise. This will also avoid an inaccurate perspective of the financial performance of your business. Combining personal and business expenses can also cause you to lose track of expenses you have personally paid, and you may not be reimbursed. It can also take longer to sort through and track business vs personal expenses later.
Thankfully all these mistakes can be avoided by engaging a qualified professional in the accounting and bookkeeping field. Outsourcing is an affordable way for SMEs to engage highly skilled professionals who can provide quality reporting and expert advice. This is especially advantageous to time poor business owners who may not be able to put in the time and effort to manage it and can better utilise their time by focusing on the growth and profitability of their business. This is especially advantageous to business owners who may not be able to put in the time and effort to manage to their business. They can better utilize their time by focusing on the growth and profitability of their business.
How Accario Helps with Accounting and Finance Needs
You may not have the volume of transactions to hire an accountant full-time. We provide scalable accounting resources to suit you as you grow. You could start with a part-time accountant (or even pay for hours) and over-time push up to a full-time equivalent. The good news is that we will take your business in a more profitable direction.
There will come a time when you really should outsource or delegate all your accounting. If that time is now, let’s chat about getting you your own Back-office. As an ISO9001 certified outsourcer, we will assign you a qualified accountant who operates skilfully at the highest level and who is managed by a local accountant.
We offer low prices with fixed monthly costs which means no hidden fees and no nasty surprises! From Bookkeeping to Tax to SMSF Admin and Audit, we offer the full suite of Accounting and Finance services to free up your time and give you peace of mind. Let’s get started!
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