It may be daunting as a small business owner, looking forward and not knowing what the future can bring. Many new businesses fail for simple reasons such as erroneous bookkeeping or inadequacies in budgeting, cash flow forecasting and financial management.
These are avoidable by taking simple steps and being smart with your finances. Here are some mistakes that you should avoid as a business owner.
1. Choosing to DIY bookkeeping
Unless you’re willing to put a lot of time and effort into maintaining your own books for your business, it might be better off for you to outsource your bookkeeping to a professional bookkeeper. Outsourcing your bookkeeping to a skilled bookkeeper will free up time for you to focus on your business.
A skilled bookkeeper can also go the extra mile and provide help with your financial planning or optimize the use of your bookkeeping software.
Maintaining your own books often results in errors which will take up time and money to fix further down the road.
2. Not recording and keeping receipts of expenses
Don’t forget to keep record and receipts of small purchases, even those under $75 dollars.
Over time, the ATO may come looking for proof of these expenses when you make claims, so better to stay safe than sorry. Additionally, beware when making business purchases out of your own pocket because it’s easy to lose track of these.
Remember: When in doubt, keep the receipts!
There are plenty of apps and software which make it easy to scan and keep the receipts. Just ask your bookkeeper for suggestions.
3. Lack of communication with your bookkeeper, whether they are internal or external
Whether you have a bookkeeper as an employee or have outsourced the work to a bookkeeping/accounting firm, make sure you constantly communicate with them. Bookkeepers can only work with the data that you provide them. If you fail to mention expenses or payments for regularly used services, you may have serious issues later on. They need to know the ins and outs to be able to maintain your books for you.
4. Forgetting to reconcile bank statements
Reconciling bank statements is a simple task that involves comparing your bank statements and books to make sure the numbers add up. This will allow you know whether you have a hole in your records or whether you need to give your bank a phone call. Reconciling bank statements is a simple way to make sure you avoid mistakes with your account records.
5. Not having a backup of records
Cloud accounting software (eg. Xero) and cloud storage (eg. Dropbox and Google Drive) are backed up regularly by the service provider. However if you are maintaining records on your local drive, it’ll be a good idea back up your data regularly to avoid issues if your computer system crashes.
6. Mis-categorizing your employees
Be aware of your employee types when filing for your taxes. Your responsibilities are different depending on whether a person is an employee or non-employee, such as a freelancer or a contractor. Be sure.
7. Combining personal and business spending’s
A common recommendation for business owners is to set up a separate back account for your business. This way you can easily access information you need when you prepare your tax return. Having a separate account from your personal one will also help you to easily prepare a business management strategy when you see how your financial needs and profits line up.
Bookkeeping and finance management is a time consuming and often a frustrating part of business ownership. But it is ultimately essential if you want to succeed in your industry. Our team here at Opulent Accountants are friendly, passionate, and most of all, skilled bookkeepers. We would love to work with you to make sure you avoid these little mistakes and we’ll ensure your books are in tip top shape to help you succeed with your finances. Contact us today!