Small and medium enterprises are very enthusiastic about growing their businesses. That’s a given. The problem is that many owners fail to fully understand the fundamentals they need to ensure the success of their business.
Among the things that are often misunderstood or overlooked is bookkeeping.
Improper accounting and bookkeeping procedures could negatively affect the organisation’s financial health. When errors are made repeatedly, the company could be at risk of bankruptcy.
In this article, your trusted accountant in Australia is going to discuss some of the accounting and bookkeeping mistakes you should avoid:
Overly Relying on an Accounting Software
In the past, bookkeeping was mainly done by hand. Now, it is done almost primarily with the help of software.
This software may have multiple functions. They can help you with accounting tasks such as: invoicing, billing, credit control, tracking cash flow, inventory, etc.
Because of this, some company owners overly rely on the software’s calculations, leading to errors in the financial reports, as the software is not infallible. Don’t make this mistake.
The only way to ensure a winning hand is to review the reports, even if you are using the software.
Failing to Track Your Cash Accurately
Many consider the cash flow the lifeblood of a business. It is what maintains the cash reserves for your business.
Failing to keep track of cash flow means the company owner will not be able to monitor the company’s financial health and viability.
Combining Your Personal with Your Business Finances
This may sound like a good idea as it means you don’t have to keep two ledger books.
Incorrectly reported income, however, will mean that you will be taxed on your income based on incorrect figures.
This could lead to tax complications, accounting errors, and late payment fines.
Not Keeping Receipts
Keeping all your receipts and financial transactions on paper is a sure way to avoid bookkeeping mistakes. This is because recording your expenses on paper will allow you to quickly see if you are running a profit or a loss.
Not reviewing your books regularly also means that you will not see if you are losing money.
This leads to a loss in the business and a threat to the company’s cash flow.
Failing to Track Invoices
Invoicing is standard practice for any entrepreneur. It is a simple way to manage the books and keep track of the income and expenditure of the business.
Many entrepreneurs, however, fail to track their invoices. This leads to a loss of money in the business as the company may be paying for services that might have not yet been rendered.
Not Comparing Your Financial Reports
Any accountant who has run a business for several years will tell you that it is important to compare your financial reports from one year to another.
This will allow you to see if you are making money or losing it. It will also tell you if your business needs enhancing or changing.
Conclusion
There are many accounting and bookkeeping mistakes that business owners make while they are managing their companies. These mistakes could negatively affect their businesses. Avoiding these mistakes is the only way to ensure that your business is on the right track. Hiring a dependable accountant in Australia who knows to avoid the blunders discussed above is also a good idea.
The ECommerce Accountant offers reliable services from the best accountant in Melbourne. From bookkeeping to preparation of tax returns and handling payroll, you can depend on The ECommerce Accountant to do an excellent job of it. Contact us today to learn how we can be of help to your business!