Having a strong finance function is an imperative part of your business. With this, you must ensure that your bookkeeping is done correctly so that your figures are accurate so that you can assess your business position. When your numbers are right, you can forecast and have a grasp as to what’s likely to happen in the next 12 months. This article details 4 pricey mistakes that can be made with bookkeeping.
1. Doing it yourself
We are not the best people to rewire a house. We could try, but it would end poorly and would probably cost a large sum to fix. This is what we must stress with your bookkeeping. Of course, you can do it; however, doing your own bookkeeping is one of the worst things you can do as a business owner. You are probably not the best person to do this will most likely result in a mass of errors your accountant will most likely have to clean up and charge you for.
There is a massive opportunity cost of doing your bookkeeping. Business owners think that they are saving money by doing it themselves, which in some cases is true. But doesn’t it make sense to have a professional do this and you focus on other areas of the business such as business development and actually doing the work? It may result in you saving a few hours per week hiring a bookkeeper, which will result in a greater net position as you could win a few more clients with your extra time.
2. Failing to reconcile your accounts
reconciling your businesses’ books with the bank statement every month (at the absolute minimum) is a responsibility that must be done. It’s extremely important for you to have a grasp of your income and expenses, but also to complete things like your Business Activity Statements every quarter. Doing this on a monthly basis allows you to ensure that bookkeeping errors are successfully eliminated before they lead to a major financial setback.
3. Combining personal and business expenditures
It’s imperative that business and personal expenses are recorded separately at all times, irrespective of the size of the organisation. One of the first things that small business owners should do is to open a business account and ensure that this account only has business related transactions in it.
If you’re constantly using your business to pay for your personal expenses, a strategy session with your accountant may be required to adjust your salary or dividends that need to be declared for the year.
4. Lack of communication with your bookkeeper
Your bookkeeper should always be in the loop of what’s happening with your business. It’s essential that small business maintains complete information of its transactions, and it’s even more crucial that this information is thoroughly communicated with the bookkeeper.
Other than maintaining clear communication with your bookkeeper, maintaining a paper /digital record of all the transactions (big or small), makes it easier to keep tabs on all of your income and expenditure. This can be done with some great digital software like Dext.
As written above, it is extremely essential to ensure that your bookkeeping is handled correctly. You can look to do it yourself, however we have found that engaging a professional does wonders for your business. Not only does it allow you time to focus on other parts of the business to pull in more revenue, but you can also rest assured that everything is being done flawlessly. Contact Link if you are interested in having your bookkeeping looked after by a professional.