Want to ensure your financial accounts are up to date and accurate?
Then getting your bookkeeping right is critical.
With all those transactions and details to stay on top of, it doesn’t take much to make a little mistake – but those minor errors can pile up and cause an accounting nightmare!
And no one wants to deal with a nightmare of the accounting variety!
They can be costly and time consuming to fix.
To help you stay on track with your financial management, we’ve listed the most common bookkeeping mistakes people make. Read on to see if you’re guilty of any of these!
10 Common Bookkeeping Mistakes To Avoid
1. Not Separating Business And Personal Accounts
Rule number one when managing your business finances is to keep them separate from your personal finances, no matter how small or new your business is. Mixing the two gets super confusing and is far more time consuming to sort out. So make sure you have completely separate sets of accounts for work and leisure.
2. Categorising Expenses Incorrectly
One of the trickiest parts of bookkeeping for many business owners is knowing how to categorise your expenses correctly. The problem with getting these basics wrong is that you could be costing yourself money or unnecessarily overcomplicating your accounting.
Make sure you have at least a basic understanding of how to track and record your expenses properly. If in doubt, ask an expert!
3. Failing To Backup Your Data
By law, you are required to keep certain financial documents for seven years. Losing those important records could cause a significant issue if you are ever asked to produce them by the IRD.
Always ensure you have your financial data backed up. If you only store your documents on your computer’s hard drive, you risk losing all your data if something happens to that computer.
Make sure you store backups of all your documents and financial info somewhere secure. The safest option is to back everything up virtually using cloud accounting software
4. Petty Cash Mismanagement
Petty cash can come in handy to buy the odd thing for your business, like office supplies or coffee. But, you still need to keep track of these smaller transactions to ensure this money is not being abused or left out of your bookkeeping data.
Make sure you record every petty cash expense and keep the receipt for each so that it’s easy to reconcile come tax time.
5. Not Updating The Books Regularly
Don’t give in to the temptation to delay your bookkeeping tasks! Putting it off until next week is a slippery slope. By the time you get around to updating everything, you’ve got a massive pile of data to work through, and you’ll probably have forgotten half of your transactions.
How often you should do your books depends on your business. Once a week might suit smaller organisations with fewer transactions, but some may need to do it daily to stay up to date.
6. Not Chasing Late Payments
Unpaid invoices have a significant impact on your cash flow. Ensure you have systems in place that can track unpaid invoices and automatically send reminders. If you don’t have time to follow up personally, outsource this vital task to someone who does.
7. Throwing Away Receipts
The days of storing all your receipts in a pile of shoeboxes are long gone, but you still need to keep these (and various other financial documents) for seven years.
A range of handy apps exist that make it easy to keep track of all your receipts by snapping a photo that syncs with your accounting software. Just make sure you remember to grab that pic before disposing of the paper trail.
8. Doing Everything Manually
Save time and increase accuracy by utilising all the fabulous technology that exists to help you manage your finances! Accounting software like Xero streamlines your bookkeeping, and there are loads of apps out there that can help with everything from payroll and inventory to invoicing.
Embracing technology can really help cut down on the number of common bookkeeping mistakes you make.
9. Skipping Account Reconciliation
Account reconciliation is one of the most vital bookkeeping tasks is to make sure the data in your books matches up with the amount of money in your bank accounts.
This simple job should be done at least once a month. Staying on top of it ensures you pick up any errors before they become problematic, and have more time to rectify them.
10. Trying To Do Everything Yourself
The thing about the most common bookkeeping mistakes is they tend to happen when you’re rushed, not paying enough attention, or not quite sure what you’re doing.
The great news is that you don’t have to do everything yourself. As a business owner, it’s okay to pass the ball to someone else so you can focus on the overall gameplay. Bookkeeping can be time-consuming, and for some, tedious.
The best way to avoid making mistakes? Hand it over to a professional. The team here at Admin Army are the ultimate professional bookkeepers. We handle all the daily financial tasks, so that you can focus on the other more important areas of your business.