The top 10 mistakes in DIY bookkeeping
It’s time to put your bookkeeping processes under the microscope again as we draw closer to the end of financial year.
It seems that bookkeeping is either a task left in the ‘to do’ basket until it’s too late or done at the last minute, increasing the likelihood of mistakes. I know that many small to medium business owners are often juggling a variety of tasks, from managing staff and business developments, through to hands-on work.
However, simple bookkeeping mistakes can cost a small business thousands of dollars – money better seen on the bottom line. They can also expose owners to substantial fines if uncovered by an ATO audit.
So here are some of the common pitfalls, or what I call the top ten mistakes of DIY bookkeeping.
1. Using computer software that is too complicated for your level of accounting expertise
Some software programs are too complicated for most business owners who don’t understand double entry accounting. As a result, you could potentially leave yourself with a ‘shoe-box’ packed with information that will either expose you to risk in a tax audit, or require your accountant to spend extra time and money sorting out.
2. Short-changing yourself by not claiming valid tax deductions
Many business owners often ‘short-change’ themselves of tax deductions they can rightfully claim. In most cases this is a simple oversight such as not keeping accurate records of cash expenditure.
And here are three common and simple mistakes when it comes to GST. It’s easy to fall into these traps, but also quite easy to avoid them.
3. Claiming GST credits without valid tax invoices
4. Claiming GST credits for full amount of purchase when goods are used partially for private purposes
5. Claiming GST credits where supplier is not registered for GST
6. Not invoicing quickly and letting overdue debtors fall through the cracks
A lack of time can mean that business owners take weeks or even months before getting their invoices out to their customers. This sends an implied message to customers that you don’t care about getting your money.
Also, make sure that you have appropriate systems in place to keep track of debtors and follow through on payments due. Allowing outstanding debtors to fall through the cracks can put enormous strain on your cashflow.
7. Paying incorrect employee super contributions
Superannuation Guarantee is the official term for compulsory superannuation contributions made by employers on behalf of eligible employees. An employer, regardless of whether they are a small or large business, must contribute the equivalent of 9.5% of an employee’s ordinary time earnings for the 2016/2017 year and this will remain the same for the 2017/2018 year.
8. Missing deadlines for PAYG or BAS
Missing the deadlines for PAYG or BAS puts unnecessary pressure on you and your business. You can check your BAS due dates by visiting the ATO website here.
9. Failing to check records with the bank to ensure accuracy
This goes without saying, but is often overlooked.
10. Failing to keep back-up records
Many business owners need to show more vigilance in ensuring back-up copies and systems are in place to safeguard their financial files in case of a technical breakdown. Just imagine the information you could lose!