7 Mistakes of Small Business Bookkeeping

Bookkeeping is a necessity for business regardless of its size. In many small businesses, the bookkeeping activities are done by the owner itself. There is no problem in doing so if you have the right knowledge, because if you don't then it is another story. Having seen business owners reach out to professional bookkeeping services only after losing money by applying methods without the right know-how.

Here are some of the common bookkeeping mistakes made by business owners and ways to avoid them

No separation between personal and business finance

Start-ups and small business owners tend to mix up their personal finances with the business. The owner himself may have made all the payments to set up the business however keeping the business and personal finance separate will give the company and the finance structures a clear view on the health of the business. Having separate bank accounts for the company; receiving and making payments through that account will allow easy monitoring of the cash flow.

Not updating the records regularly

Bookkeeping essentially records the financial transactions on a daily basis and failing to do so can cause confusion. Owners might be busy with his/her core activities that they just postponed the bookkeeping activity of day to the next day or end of the week, this can be a problem while updating the records at the end of the month and the numbers don't add up.

Not saving receipts

Having proof of the purchases made in the company's name is vital as it will be helpful when providing documents for deduction claims. Recording and keeping records of even small transaction is necessary.

Not classifying employees correctly

There are significant difference in payroll taxes of an employee and a contractor. So classification of employees should be done carefully and accurately to avoid paying unnecessary taxes/penalties.

Not ensuring safety and backup

It is a standard procedure to keep backup and ensure safety of the records; however this is overlooked by many small business owners.

Not meeting deadlines

Not able to meet the deadlines in submitting BAS or PAYG can result in heavy penalties and so it should be avoided.

Not having a system

Having a consistent system in place is vital. Paper and pencil, excel sheets or accounting software, whatever system you use, make sure that you use it consistently and effectively. This can make a whole lot of difference in the long run.

In most small size business the owner (with the right knowledge) himself handles bookkeeping; however it is of clerical nature and consumes valuable time. This valuable time of a key person is consumed by a clerical yet important job is not acceptable in the competitive environment and hence reaching out to professionals is highly recommended.

As specialists in Bookkeeping and Accounting services we provide the best option to select your bookkeeper from among the busy. You can find us in Sydney, Wollongong and New Castle.


 By Nick Joseph


Article Source: 7 Mistakes of Small Business Bookkeeping