Lack of understanding of bookkeeping and accounting principles
One of the biggest mistakes small business owners can make is trying to do their own books without the expertise required to meet legal requirements or standards of bookkeeping practice. Tax, financial deadlines, pay, superannuation, invoicing and keeping records are essential to the function of business. Failure to correctly calculate any of these items can be expensive, embarrassing and lead to trouble with the Australian Government. Getting them right first time is therefore essential.
An integral part of most modern societies, it seems that tax law gets more complicated every year. It can be a nightmare calculating what you owe to the Government, particularly once you start factoring in Pay As You Go (PAYG) tax on personal income, Goods and Services Tax, and in some cases Company Tax. Unfortunately, miscalculating tax can be devastating, hitting you with unnecessary fines that could have been avoided with good accounting and taxation practices. Calculating taxes right the first time is essential for business operators. Bookkeepers, therefore, are an essential component of business operations.
Missing important deadlines – PAYG, GST, end of financial year
All business owners are aware that the end of financial year is the most important day of the year. Business operators simply get overwhelmed by the day-to-day duties of running the business. End of financial year sales, stock takes and managing employees takes time and effort. Yet missing a reporting deadline can be far more costly than the operator letting the ‘reins’ slip for a moment. A late tax return is likely to be punished by the Australian Tax Office (ATO) with a fine for the business owner. Worse, it’s an invitation for a thorough investigation of the businesses books. At the best of times, it means extra work for the business. At worst, it can spell financial ruin.
Poor and incorrect invoicing
Invoicing is essential. Bad invoicing management is expensive. Missing payment deadlines equals late fees, bad credit rating and damage to B2B relationships. Not sending correct invoices to customers is just as bad. A business can wait months – or forever – for payments that never come. Implementing and running an accurate invoicing system is essential to the operation of business. Employing qualified people – usually bookkeepers – to run an efficient invoicing system can pay for itself in no time at all.
Incorrect employee pay and superannuation
Full time employees frequently spend more time with their workmates than their families. Employers and employees working closely together can develop close personal relationships. Mistakes in pay can therefore be very embarrassing for business operators. Employees rely on that income to pay their bills, put a roof over their head and provide for themselves and their family. Superannuation payments are part of employee pay and are actually mandatory in Australia. Not only is a miscalculation embarrassing, it can be punished with fines from the ATO. Accurately calculating pay and superannuation is therefore essential.
Failing to keep backups of records
Backups are essential in case of a disaster. Disaster need not be violent or destructive. Modern computer hard drives can fail irrecoverably without making a sound. Data recovery costs thousands and there are no guarantees information will even be recovered. Day to day records of income, expenses, liabilities, receivables and payables are necessary just to keep a business afloat. However, backing up data is often forgotten in the day to day hustle of commerce. Employing a bookkeeper to maintain up to date records on a properly set up IT system and make hard copy backups of data is therefore invaluable to commercial operations.
Inadequate understanding of accounting software
Accounting software should simply the life of business people. It can generate astonishing reports at the blink of an eye – if it is used properly. Software is never static. It is constantly revised and updated to fix problems, add new features or account for regulatory changes. Continuously relearning accounting software to do the same daily recording tasks is an extra burden on DIY bookkeepers. Professionals not only have to keep up to date – they learn every aspect of programs in order to maximise their potential.
The upfront expense of a bookkeeper can be intimidating to a business owner operating on a tight budget. Getting hit with fees and fines because bookkeeping standards are not good enough costs more. Professional bookkeepers develop a depth of knowledge and expertise in the field that comes from doing the same job all day, every day. It is hard for a business owner doing their own accounts a few hours a week to develop the same depth of experience. For most people, it simply makes sense to hire a qualified bookkeeper and let them get on with the job of looking after the books. However, it is still important for business owners to understand enough about bookkeeping practices to understand what their bookkeeper is doing and make sure there are no irregularities. It is easy to take a bookkeeping course online and learn essential financial skills needed to run any small business.
Oops! We could not locate your form.