How to avoid these three most common business bookkeeping errors

Effective bookkeeping can make a huge difference in the success of a small business. When the books are well-managed, you have time to focus on other areas of growth and opportunity. But when they’re not, it can lead to a range of errors, inaccuracies and financial challenges that can be hard to bounce back from.

And mistakes can easily happen, even for business owners who are confident with the essential bookkeeping basics. Let’s explore some of the more common business bookkeeping mistakes we see – and how you can avoid them!

One of the most common mistakes we see small business owners make is having an irregular schedule of recording transactions and reconciling their accounts.

While it might feel easy to stay on top of these tasks initially, it’s just as easy to start falling behind when more important tasks come up (like making sales and retaining clients).

This kind of sporadic record-keeping can lead to missed or duplicated transactions, make it harder to budget and forecast your cash flow and even cause negative tax implications if you haven’t recorded your income properly.

Plus, the longer you leave between accounts reconciliation, the harder it can be to go back through your records and identify any discrepancies or errors. This just takes up even more of your valuable time as a business owner!

So how often should you be recording transactions and reconciling your accounts?

That will change depending on the size and complexity of your business – especially as you grow.

But we generally recommend setting aside time every day to record any transactions made that day, and going through accounts reconciliation each month.

Mixing personal finances with business finances is a common mistake business owners make during the early days.

Initially, it might seem convenient to just have invoices paid into your personal savings, or to use your own transactions account to pay work expenses and bills.

But failing to separate your personal and business expenses makes it harder to gain financial clarity over your business. Added personal income might make it look like your business is performing better than it really is. It can also cause complications with tax reporting because you’ll need to untangle personal transactions. Anything incorrectly reported as a business expense can create tax errors and cause further issues down the road.

If you’ve started your business with combined personal and business finances, we recommend separating them ASAP and keeping clear boundaries between them.

Tax obligations will vary depending on the size and structure of your business.

But generally speaking, small business owners will typically have some or all of the following obligations:

• Income tax against profits
• GST (if the annual revenue is more than $75,000)
• Payroll tax
• Employer superannuation guarantee
• Business Activity Statement (BAS)

Any tax obligations typically have a deadline and subsequent penalties for non-compliance. And even if you can fill your calendar with all the tax deadlines, you may not be able to stay on top of any changes made to tax thresholds, percentages or requirements.

Plus, even if you’re managing all your tax obligations effectively, you may not be aware of all the deductions and allowances that are available to you as a business owner!