7 Bookkeeping Mistakes Business Owners Should Avoid

Statistics reveal that about half of all small businesses fail within the first 2-5 years. The main cause of business failure is poor financial planning and management. Accurate bookkeeping is essential to know how your business is operating and to be able to make informed decisions which affect the success of your business.

Some of the common mistakes business owners make are:

1. Doing your own books – Some business owners think that doing their own bookkeeping is saving costs. However, is this as cost effective as you may think? If you don’t have the required basic accounting and tax knowledge, the cost to have your Accountant ‘fix’ the accounts later may in the long run cost you much more than employing a professional, qualified bookkeeper.

2. Not reconciling accounts – One of the key elements of proper bookkeeping is to ensure that your accounts are reconciled against Bank statements regularly. Some business owners fail to do this or not complete this exercise fully each month which can lead to a misunderstanding of your true cash flow position.

3. Incorrectly tracking expenses – Without formal knowledge of bookkeeping practices, it is likely that transactions may be coded to the wrong categories. Entering transactions to the correct category is vital for proper reporting and analysis of the business and GST purposes. A profit and loss report should also be reviewed on a monthly basis.

4. Incorrectly recording GST – Many businesses don’t report the correct amount of GST on the BAS due to incorrect data entry and unfamiliarity with GST law. Oversight of this can lead to significant fines and penalties.

5. Cash flow not effectively monitored– As part of the bookkeeping process and reconciling bank accounts, entering of supplier bills, customer invoices and payments should be regularly completed. This allows the business owner to be able to forecast their cash requirements. A professional, qualified bookkeeper can assist the business owner to manage the cash flow position and advise on further business growth.

6. Invoicing/Debt collection – Business owners are sometimes too busy to invoice customers regularly and follow up customers for payment which in turn affects cash flow, which in turn reduces funds coming into the business and could stifle growth opportunities. A professional, qualified bookkeeper can assist in this process and set up an effective debt collection system to improve cash flow.

7. Compliance obligations – Business owners are sometimes not aware of all the compliance obligations that they are required to meet. Using the services of a professional, qualified bookkeeper will give you peace of mind as they will keep your records up to date and lodge all forms on time, and avoid fines and penalties

And there are many more! If you need more time to focus on growing your business and make sure that your bookkeeping and financial obligations are being met, please contact Tony Lewis at Jaguar Bookkeeping on 08 8212 0217 or info@jaguargroup.com.au who will be happy to assist.