Being a business owner, it’s obvious you’d look to save a few bucks of money by taking all possible sorts of work on your shoulders. These primarily include your small business accounting errors and bookkeeping duties. While there’s no issue in that provided you’re certified in either or both of these, it’s not the case mostly.
Additionally, even if you aren’t certified, the Australian taxation office is there to support your small business through various measures. Furthermore, with the tax season being the crucial phase of any business, you’ve got this tax time toolkit to prepare for your next tax season.
However, when it comes to growing your business, a few decisions and avoiding a few small errors can pay off well. These include how well you set up the management of your firm’s finances and avoid the following small business accounting errors.
Small Business Accounting Errors You’d Avoid At Any Cost!
According to surveys, a large fraction of small business owners tackle the tasks required to pay bills, invoice consumers, among others on their own and fail miserably. The situation worsens up further due to the following small business accounting mistakes.
Failing to take a professional accountant on board
Failing to take a professional and experienced accountant on board is the first mistake that takes a toll on every business. By hiring a professional to handle your business’s accounts, the probability of errors in the key areas reduces. These include expense tracking, paying vendors on a timely basis, balancing bank accounts and staying on top of payroll.
Moreover, a professional hand can handle your employees’ withholding taxes properly, track all your financial transactions, and much more.
If you can’t hire a full-time in-house employee due to the fear of overhead expenses, hire a virtual freelance bookkeeper or accountant. This will save you a lot of bucks without compromising the work quality.
Not tracking your business records correctly
For effective bookkeeping and accounting, tracking the records accurately is necessary. When records are not kept accurately, you invite the following problems.
- Vulnerability to losing money,
- Being late on important bills,
- No preparation for the tax season,
- Unable to plan for the next month or beyond, and so on.
Any error while entering the transaction data into the spreadsheet or failing to reflect a bill payment can cost your business a huge sum of money. Hence, it’s important that record keeping is done by experienced hands instead of you. This will likewise measure the health of your business.
Mixing your finances with business accounts
It’s common indeed for small business owners to mix their finances with that of their business. Though it’s understandable at this point when you’re just starting up, it can/should be avoided.
Let’s take an example.
You head to the nearby Walmart store to pick some important office supplies. However, since you’re already there, you pick some home stuff too.
So, what’s the big deal about this?
You should know that it’s more than just having the office stuff & personal stuff on the same Walmart receipt. According to Clutch, over one-quarter of the small business owners and/or managers lack a separate bank account for their business.
Not separating the personal transactions from the business ones can be a big headache with the tax season around. Moreover, there are high chances that you might miss an important expense that you could list as a business deduction.
Besides, there are several other drawbacks of mixing your finances with that of your small business. For instance, you might struggle to apply for a business loan or line of credit.
Improperly managing the billing
Improperly managing to bill or invoicing customers is another major small business accounting mistake you’d avoid. By effectively billing or invoicing your customers, you ensure that your revenue comes in on time. Thus ensuring that you can utilise it for business expenses, payroll, and other needs.
If any invoicing gets delayed, it’d take more time for the customer to pay. This will make it difficult for your business to cover its bills due to late payment.
Hence, it’s a recommendation to immediately invoice your customers after fulfilling your end of the transaction.
Not planning for the upcoming tax season
To save money on accountants or tax specialists, small businesses often get attracted to the DIY tax software to prepare a simple tax return. Though it’s simple to use, it again requires knowledge and experience.
If you’re not organising & recording all manner of receipts and documents for 11 months of the year, you can’t avoid the struggle to organise them to file the tax return in April.
Hence, you must plan for your tax season by properly organising and tracking your receipts and other documents throughout the year.
These are the top five small business accounting mistakes you avoid at any cost.
We take immense pride in introducing you to our bookkeeping experts who carry an abundance of experience on their shoulders. Furthermore, they are the support pillars of infinite firms they have worked relentlessly for.
Not to forget that we are certified by XERO. In a nutshell, we are proficient in multiple-accounting software, and that’s our identity.
Contact us today to book your free trial, and you focus on the work that matters to you, and we’ll take care of the rest!
Let’s connect on +61 451320102