Most business owners have a wide range of skills that they put to use to grow and maintain the strength and profitability of their companies. However, unless you own a bookkeeping business it’s unlikely that bookkeeping is one of those skills. If you’re a great Electrician you went into business because you’re a great Electrician not because you are good at bookkeeping or marketing or IT for example. The damage to your business from having inaccurate accounts can be long-term and easily avoided by either learning the fundamentals yourself or hiring a professional to handle your books.
A business tracks all the data in its accounts to make important operational, financial, and investment decisions. The events of the previous 2 – 3 years have highlighted, more than ever, the need for having up-to-date and accurate accounts – this allows you to make those decisions based on fact. Here is a list of common bookkeeping mistakes we see regularly and our suggestions for avoiding them.
The accuracy of processing the data you submit to your accounting software determines how accurate the information is in your accounting system. Some of the common errors that we have seen, and you need to be aware of are:
- Misclassification of capital assets as expenses or vice versa
- False start-up expenses being entered or coded incorrectly
- Charges attributed to the wrong entity altogether. If you have multiple businesses or a Trust then the cost needs to be reflected in the correct file
- Charges made to the incorrect account number
- Data input mistakes.
Entering incorrect dates is one of the most frequent billing errors. You should always have two dates on an invoice, the date the invoice is issued and the date that payment is due. The date that the invoice is issued is reflected in your reports’ accounting period and affects your GST. The payment date is the date that payment is due and has an impact also on your GST (if you are a payments bass) and has a massive effect on your cash flow.
Have you ever had debtors that you are positive have paid you, but your software still lists them as owing? Does anybody ever pay someone twice? You could avoid these situations by ensuring your bank accounts are reconciled in your accounting software. In addition to the reconciliation, it’s important that when you pay an invoice that is entered into your Bills you code the payment of that invoice against the invoice (not as a spend money). This can often be confusing so feel free to reach out if you need assistance with this.
Most software can automatically send reminders for outstanding invoices and it’s generally turned on to send these emails by default. But – if you are going to send automatic reminders you need to ensure you have your bank feeds all coded off otherwise you will send automatic reminders to someone who has paid you already – a sure-fire way to annoy your customers. The same applies in reverse for money that you owe (creditors). Ensure that you have your bank feeds up to date ensure the payment is reflected in your accounting software and that you, therefore, don’t pay an invoice twice.
3rd Arm Admin
If you work in or own a small or medium business, you may find it difficult to perform all of the above and more on your own. A virtual bookkeeper may help. You will be able to concentrate on more important issues while they ensure that everything runs well in the background. If you’re seeking a reliable bookkeeping assistant, contact 3rd Arm Admin. We can assist you in all of the methods listed above to guarantee that your business runs as smoothly and effectively as possible.