4 Common Bookkeeping Mistakes That Can Cost Your Business
Bookkeeping can be the most tedious and difficult part of running a small business. When most businesses start out, one person is often responsible for all aspects of managing the accounts.
Mistakes can happen easily, and these mistakes can cost your business money.
We list 4 of the most common bookkeeping mistakes small business owners tend to commit when they handle their own bookkeeping tasks. If you answered yes to any of these mentioned below, there is good news for you: it’s never too late to improve your bookkeeping and finances.
Not Keeping Up to Date Records
Accounts / bookkeeping is a discipline. As a business owner there are a lot of other things you need to attend to, and bookkeeping can easily be pushed to the bottom of your seemingly endless To-Do list.
The biggest challenge is keeping the receipts. Setup a simple process to snap photos of your receipts and forward them into your accounting system’s inbox. If daily updating is not possible, at least dedicate some time once a week to do your bookkeeping.
Payroll
For many small businesses hiring staff opens up a large can of worms. It is important if you are employing that you get some training around the requirements to maintain employment relationships and know how to manage these.
Ensure you setup the paperwork the right way and follow the disciplines to ensure you don’t create a tribunal risk.
There are free government tools available and there are other businesses providing tools and resources, such as HRtoolkit who provide a complete HR DIY Toolkit and the NZPPA who have various training courses and resources.
Once you have staff employed ensuring you get their payroll accurate each pay period is important. You need to know the difference between Holiday Pay and Annual Leave, Otherwise Working days, treatment of public holidays in final pays and more.
NZ Payroll is complex. We would consider this the first area a business owner should consider outsourcing if they do not have the skills to manage this work.
Month End / GST processes
Generally, the biggest mistake made by 95% of business owners managing their accounts is not having a formal month end process in place.
Spending 1-4 hours per month to check that everything is entered correctly will ensure that the Profit and Loss report is accurate and can be used to drive business decisions.
Check:
- all sales invoicing is completed and dated in the month
- bank accounts are reconciled and balance to the bank statements
- accounts payables items are all entered with invoices attached
- payroll is reporting correctly
- the gst is reviewed and correct
- and that the Balance Sheet is accurate
If you don’t know how to action those items, then you are better placed to engage someone to assist with these tasks. It might be you manage the daily entries and outsource the end of month process to ensure you are doing things correctly and your accountant can action end of year smoothly.
Time vs. cost
How many times have you thought that if you do something yourself, it will save you a ton of money? This process can end up costing you more – both financially if not done right, and in time. Keep a track of your time that you spend doing the accounts.
When you’re finding that you don’t have enough time in the week to focus on all the tasks you to do, the accounts and payroll are an easy area to create extra time in your diary.
The constant workflow of maintaining accounts can sometimes feel unrelenting and mean that business owners get distracted from, the ‘thinking’ work or sales drive, or the reverse can happen where they fall behind on the accounts because they are focusing on the sales and growth.
Keep a track of the tipping point where you don’t have enough time in your week and prioritise the tasks that only you as the business owner can manage and gradually look to outsource or hire to cover the rest.
While it’s good to be aware of these common bookkeeping mistakes that can be costing your business more, the most convenient and efficient approach to stay on top of your business accounts is still to entrust your bookkeeping to the experts.
A professional outsource team can add value by taking over some tasks to create time in your diary but also as experts in the software and accounts processes, they can focus on automating as much as possible to be time effective. For most NZ small businesses 2-8hours support per week depending on the transactional volumes can cover the accounts function.
If you want to spend time focusing on your business, we can help with your bookkeeping.
