Although most small business owners recognise the importance of careful financial management, few are keen to actually spend their time crunching the numbers. And while we understand that it’s typically not one of the more glamorous jobs, bookkeeping is at the heart of a company’s success, and mistakes can be very costly.
Here are five of the most common bookkeeping pitfalls, and some simple tips for avoiding them.
- Mixing business and personal
All too often, business owners adopt a ‘buy now, sort later’ approach to expenses, using the same credit card for personal and professional purchases. At the end of the month, they’re left poring over statements, trying to sort things out. Mixing business and personal expenses costs extra hours of bookkeeping each month, and muddies your overall financial picture. Avoid this pitfall by using a separate credit card and bank account for business, and being disciplined about separating expenditures.
- Neglecting to track reimbursable expenses
Receipt-tracking is a necessary part of business ownership. You need to keep track of receipts to understand spending patterns and effectively manage your company’s finances. And if you want to claim deductions at tax time, you’ll need to submit receipts along with your tax return.
But far too many business owners take a haphazard approach to collecting and organising receipts—especially while on-the-go, where a whopping 50% of their expenses are generated. Get the deductions you deserve and simplify tax prep by using an expense-tracking app. Free options like the ATO’s myDeductions app can record mileage, income and expense, and can create a hassle-free tax time by beaming info directly to your Accountant.
- Not taking advantage of technology
Are you still relying on manual accounting methods? While basic spreadsheet tools can get the job done, they leave the door wide open for human error. What’s more, manual methods simply can’t match the technological benefits offered by software like Xero. Xero tracks invoicing, links with your credit card and business accounts, organises expenses and generates insightful financial reports. And if you’re using an external Bookkeeper, they can manage your business bookkeeping needs remotely through your Xero account. You can find out more about Xero here.
- Not keeping accounts up to date
Let’s be frank. Most business owners don’t look forward to that weekly appointment with the books. In fact, many entrepreneurs cite bookkeeping as their most dreaded responsibility and will successfully find a host of reasons to avoid it. Just don’t.
- Doing it all yourself
It is completely understandable for budget-conscious entrepreneurs to try to cut costs by handling bookkeeping on their own. However, taking advantage of professional help – even on a part-time basis – can generate substantial savings of time and money over the long term. You can find out more about Ross Group’s Bookkeeping services here.
Time to get savvy about bookkeeping. The biggest pay off? Saving time with these bookkeeping tips will allow you to invest your talents and energy where they’ll be most profitable!
To find out how Ross Group can help you manage all your bookkeeping needs, just email us or call us on 9887 8751.