Bookkeeping is one of the essential tasks you need to get right for your business.
But that doesn’t mean it’s easy. If you try to rush through your bookkeeping or play it by ear, you are putting your business at risk.
The figures and reports generated by your bookkeeping provide essential data to help guide your business. Get that data wrong, and you could be in trouble!
The best way to get it right is to know what often goes wrong! So, here are the 5 common bookkeeping errors you need to avoid.
5 Common Bookkeeping Errors To Avoid
1. Not Separating Business From Personal
When you are just starting out or have a very small business, it’s tempting to try and manage all your finances from one account. This is never a good idea.
It just makes things more time-consuming and confusing down the line with different expenses getting confused. Make an effort to separate your business finances from your personal ones from day one by setting up separate bank accounts and payment cards.
That way, you will always have a clear picture of where your business finances are at. This will make it so much simpler when tax time rolls around and makes your accountant’s job easier too.
2. Leaving Things To The Last Minute
As a busy business owner, there are always a dozen things on your to-do list. It’s tempting to keep bumping your bookkeeping tasks to the bottom as non-urgent. However, procrastination is not your friend when it comes to your finances!
The longer you put off updating your records, the less real-time information you have about the state of your finances. Over time, the missing data can become problematic, especially if tax time creeps up on you and you have weeks or months of records to update.
To avoid bookkeeping errors, tackle this task weekly, if not daily. Set aside enough time to do it without rushing, and schedule extra time to get sorted well before your taxes are due.
3. Improper Record-Keeping = Bookkeeping Errors
The days of stashing your receipts in a shoebox to give to your accountant are long gone! With digital storage and online bookkeeping programs, there’s no excuse for losing any paperwork.
If you receive any hard copy receipts, bills, or invoices, immediately scan them into your online record-keeping system. This means there will be no surprises come tax time, and you can safely store all your financial records for the seven years required by the IRD.
Oh, and a bonus tip: don’t forget to back all your records up!
4. Letting Late Payments Slide
Nobody likes to have that awkward conversation about late payments, but it’s in the best interests of your business to chase up unpaid accounts promptly.
Delayed payments can significantly impact your cash flow and cause problems for your business. Ensure you track and follow up on late payments. Using the right accounting software makes this task a piece of cake.
You don’t necessarily need to recover the money instantly, but at least set a payment plan in place with late payers so that you know when the money will come in.
5.Trying To Do Everything Yourself
There’s a lot more to bookkeeping than merely keeping track of your purchases and invoices. You need to understand your tax and GST requirements, manage payroll, correctly categorise your expenses, and generate and review financial reports.
If you don’t have time to understand all these pieces of the puzzle, you could be making critical bookkeeping errors that negatively impact your business.
Your time is valuable, so instead of trying to do everything yourself, consider outsourcing your bookkeeping tasks. That way, you’ll be able to focus your energy on growing your business, knowing that the financial foundations are sturdy.
Here at Admin Army, we wage war on bookkeeping tasks all day, every day. So, if you need some help avoiding critical bookkeeping errors in your business, then we can help you do it.
Get in touch with us today to discuss how we can take the pressure of bookkeeping off your hands.