The 5 WORST Bookkeeping Mistakes

In Bookkeeping Basics | Posted 19/10/2018 at 5:05pm

The 5 WORST Bookkeeping Mistakes

Bookkeeping Basics #8

They say that you should learn from your mistakes. But we believe that learning from someone else’s mistakes can’t hurt either!

Our latest Bookkeeping Basics webinar explored the 5 WORST bookkeeping mistakes; what they are and how to avoid them. The aim of this was to uncover some of the common mistakes in order to assist you throughout your small business journey! Although we strongly recommend outsourcing your bookkeeping services, if you’re self-managing through small business bookkeeping, here’s the five mistakes you need to be wary of and avoid at all costs:

Mistake #1: Not Setting up the Chart of Accounts properly

If possible, try not to use what the bookkeeping software gives you, as it might not be correct or relevant. It’s far more beneficial to build your own so that you can only include the accounts that are necessary to track. This will make life much easier. (It’s also important to make sure the GST codes are correct!)

Mistake #2: Setting up a ‘Petty Cash’ account in Assets

If you have a petty cash tin in your office (these are quite a common feature in many offices!) – it is NOT an asset, so don’t set up an account for it. There are more effective ways to allocate monies spent out of your own pocket on business expenses.

Mistake #3: Not setting up payroll correctly

It is VITAL that payroll and employees have been set up correctly. Make sure you include the employee’s DOB, TFN and ensure that their penalty rates are correct. Make sure also that your linked accounts are correct (this includes superannuation, tax etc.)

Mistake #4: Treating Assets or Liabilities as Expenses

You MUST know the difference between a balance sheet item and Profit & Loss item (remember, your bookkeeper can help you with this by explaining the Profit & Loss – what it means, what it’s telling you about your business).

Mistake #5: Not Reconciling Properly

This includes ALL bank and credit card reconciliation, BAS reconciliation, payment summaries and superannuation (Bookkeepers are EXPERTS at reconciling!)

These are just five of the common mistakes but there are actually many more that are commonly made by business owners who are practising small-business bookkeeping OR sometimes offshore companies. These five in particular will take a lot of time and effort to fix. They also have the potential to make your bookkeeping file unusable which will cost a lot of money when you need to take it to an accountant to have your tax returns/financials prepared.

That being said, it’s extremely important to make sure you’re set up correctly and on track from day one which is why we offer training to small businesses and individuals. Depending on your chosen bookkeeping software, we specialise in Xero bookkeeping and Xero Cashbook, Myob Bookkeeping and QBO.

If you think your business might benefit from bookkeeping services; if you someone to lodge BAS, if you need a bookkeeping software health check, training or assistance setting up your books; don’t hesitate to get in touch. We’ll tailor a package that sets you up correctly from day one.