Entrepreneurs are often bitten by the bug of cutting costs, and thus, prefer doubling up as a bookkeeper. It may save a few dollars in the beginning, but the enormous amount of work related to managing the cash-flow, payroll and accounting can take a toll on them.
Naturally, the overburdened business owners struggle to find time in their busy schedules for accurate bookkeeping and end up making a lot of mistakes in haste. These are all common errors, but they can culminate into huge losses if not corrected on time.
Thus depending on a professional and experienced bookkeeping company in Melbourne is the best way to deal with financial data and stay on top of your accounts at all times. If you have not hired a bookkeeper yet and are still managing the books on your own, then you must be cautious of the frequent mistakes that can hamper your business.
Here is a list of the seven common errors so that you stay away from them.
1. FAILING TO RECORD SMALL TRANSACTIONS
Many times business owners in Melbourne forget to preserve the bills of various transactions that go unnoticed, such as office phone bills, travel bills, food bills, etc. However, these small expenses can transform into a big loss if not calculated as expenditure.
It happens because they do not utilise a professional bookkeeping system like cloud-based accounting software that maintains the records of all receivables and payments. Safeguarding the receipts of all the transactions is essential because they are utilised while claiming business tax deductions at the time of tax season and save a lot of money that gets wasted otherwise.
A bookkeeping expert meticulously feeds all the data into the system and makes sure that all the receipts are saved efficiently. It is highly essential to have a backup of the financial data on the cloud so that your records are not lost due to a technical snag.
2. NEGLECTING RECONCILIATION OF BANK ACCOUNTS
Reconciliation is the significant task of making sure that your bank statements are in line with the accounts. Businesses in Melbourne usually overlook this task until they have to submit the financial reports to the ATO and end up misinforming the office.
Reporting errors can lead to penalties, and thus, reconciliation should be done every week or month without fail. It is also beneficial in finding the mistakes in the books and detecting any frauds being committed by the employees.
3. NOT PREPARING A BUDGET
Most bookkeepers are experts in devising a financial plan for your business which helps in forecasting the budget and creating strategies for investments and cost-saving in Melbourne. It is a roadmap of how money should be utilised by the business without going overboard.
A budget helps in making progress made from the past year and investing wisely in resources and assets that pay off in the long-run. However, entrepreneurs avoid this step and end up spending far more than what is permissible and work without any financial goals. Thus the budget should not be ignored.
4. INCORRECT CLASSIFICATION OF DATA
It can become a problem if the books being prepared by the entrepreneurs have too many similar categories. Entrepreneurs in Melbourne may not be able to differentiate between them and end up making the same entry twice under different categories.
It can change the final amount and give you the wrong figure. It can put the whole business in a chaotic situation since all the significant decisions are based on the available finances in the company. With an inaccurate figure on hand, the budget and the investments can get disrupted.
For instance, purchasing stationery should come under immediate expenses, and a long-term purchase like a photocopier should be categorised as an asset with depreciating value.
Also, an incorrect amount added to the accounts can cause an understatement of accounts payable where the owner believes to have more capital than what is actually available. It can create financial trouble for the venture in Melbourne.
5. COMBINING PERSONAL AND BUSINESS EXPENSES
Business owners are too busy and occupied to pay attention to small details which can have a disastrous impact on the business. One such mistake is not separating the business and personal bank accounts.
It can create a lot of confusion at the time of reporting business expenses. Whether you are working from home as a sole employee in Melbourne or have a team of workers running around, you need to make sure that you are not paying for business expenses from your pocket and are not keeping the company profits for personal use.
It will become impossible to segregate the incoming and outgoing with combined bank accounts and can even lead to failure of the business.
6. FAILING TO TRACK THE INVOICES
Invoicing is an integral part of cash-flow management and takes precedence for every bookkeeper. However, most business owners in Melbourne find it challenging to get the payments on time.
It requires creating effective invoices which consist of payment links and are sent as soon as the project is delivered to the client. The bookkeepers usually follow up with the clients to remind them to make the payment on time.
They inform them clearly about the late fee clause in case of a delay without sounding overbearing. The business owner does not take all these pains and ends up getting late payments which disturb the flow of capital into the business.
7. SPENDING CONSIDERABLE TIME ON BOOKKEEPING
Time is of the essence when you are working on the books and accounts and cannot delay the recordkeeping and reporting process. Thus it leaves the business owners in Melbourne with too little time to spend on other important work.
Getting tangled with bookkeeping is a time-consuming and ongoing procedure that hampers the progress of the business since the entrepreneur is stuck with number crunching.
They do not get enough time to look into other pressing issues and have no time to create development models and expansion strategies that help in the growth of the entity. Thus it is recommended that business owners should hire professional bookkeepers to carry out the daily accounting tasks and keep the books updated and accurate.
Entrepreneurs are far-sighted individuals with business acumen, but they cannot be the jack of all trades. They have to delegate specific responsibilities to specialised professionals so that they can focus on the progress of their venture. Thus hiring bookkeepers in Melbourne is the guaranteed way of avoiding accounting and bookkeeping mistakes and paving the way for success.