21 common bookkeeping mistakes small businesses make

At first glimpse bookkeeping might seem like a simple enough matter. But plenty of small businesses manage to make a mess of it all the same, a mistake that can be expensive. Here are the top 21 pitfalls to avoid.

21 bookkeeping mistakes to avoid

1.Not bothering to keep receipts for tiny amounts – They may be small, but they're still beautiful! Small amounts soon mount up. And they document all the tiny deductions you can claim, so it's well worth keeping on top of every single one. If all you do is hurl them into a special drawer, box or file, it's a whole lot better than throwing them out.

2.Forgetting to take deductible expenses into account – Just like receipts, it's important to keep track of all your expenses, however small. Keep every receipt you're given, and don't forget to ask for receipts if they aren't automatically forthcoming.

3.Forgetting to back up your computer data – What happens if your electronic systems break down? Unless you have a solid systems backup protocol in place you could easily lose all of your business records, leaving you in a considerable financial pickle.

4.Not keeping hard copies of your records – The cloud is cool. But if it goes down for some reason it leaves you open to losing all your data. Keep printed copies and no matter what happens in the virtual world, you'll have what you need at your fingertips.

5.Handling bookkeeping yourself – While it might seem fairly straightforward, bookkeeping requires a cool head, enough time to do a decent job and a level of dedication. Doing it yourself, without the skills a competent bookkeeper offers, is fraught with risk, and it may well end up taking you a great deal longer than it'd take an expert.

6.Being careless with petty cash – Too many businesses don't bother keeping their petty cash records under control. But that's crazy when money can fly in and out of the fund so frequently and soon mount up.

21 common bookkeeping mistakes - aben bookkeeping

7.Classifying employees wrongly – These days you can hire self-employed people and sole traders, freelancers, consultants, contractors, part timers, full-timers and more, each with their own set of tax regulations and requirements. Get it wrong and you could easily end up out of pocket.

8.Poor communication – A bookkeeper is only as good as the information you give them. If they're not fully informed they can't do a proper job for you. Inform them of every detail, including bonus payments and purchases of supplies, both of which often fall through the cracks.

9.Keeping ahead of things on a regular basis – You could leave it all until the end of the financial year. But it makes a lot more sense to reconciling your books with your bank statement every month, so you always know exactly where you stand.

10.Forgetting to deduct VAT – When you don't bother to deduct sales tax from your total sales, you will end up paying more tax than necessary.

11.Categorising your expenses wrongly – The categories for expenses are simple enough, but too many businesses get them wrong. Use general bookkeeping guidelines for standard categorisation and you can't go far wrong.

12.Over-categorising expenses – There's a lot to be said for elegance and simplicity. Don't fall foul of creating too many categories when you can classify your expenses nice and simply.

13.Choosing cheap and cheerful every time – You pay peanuts, most of the time you get monkeys. There comes a point where being a cheapskate can cost you money. It make sense to pay a decent amount to a good bookkeeper than to cut corners.

14.False economies - Buy business supplies that will deliver a long and useful life rather than cheap, nasty stuff that wears out or breaks in record time. You can always wait to buy supplies until they're on sale or special offer.

15.Not bothering to fix good terms - If, like most small businesses, you habitually buy supplies from the same place, make the effort to secure yourself a good deal rather than just accepting the first deal you're given. A positive supplier relationship can save you heaps of money.

bookkeeping mistakes to avoid - aben bookkeeping

16.Letting cashflow stagnate – The better your cashflow, the better your business. It makes a great deal of sense to stay on top of income and outgoings at every stage.

17.Too much access, too little supervision – Your bookkeeper needs to know what's what. But there are limits. If you're going to hand over open access to your business records, put security checks and balances in place. Check your records every month and you'll be able to catch bad behaviour before it affects your bottom line.

18.Poor written communications – Keep written records of every decision you make, so your bookkeeper knows exactly what's what and nothing gets misunderstood.

19.Avoiding bookkeeping software – Today's systems are specially designed to deliver bookkeeping perfection. They help you put in place best practice and operate within the law. It makes a lot more sense to use it, as any good bookkeeper will confirm, rather than doing everything by hand the old fashioned way.

20.Mixing up personal and business bank accounts - Keep personal and business accounts totally separate for the best chance at tax efficiency and the least risk of confusion.

21.Leaving it too late - Don't put off bookkeeping. The longer you delay, the higher the risk of something going wrong and slipping through the net.

Too much to think about? Hand it over to Aben

We do bookkeeping, and we do a jolly good job of it. If you'd rather hand it over to the experts than struggle along trying to do it all yourself, we'll be delighted to help.


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