The Eight Most Common Bookkeeping Mistakes

Make sure your bookkeeping isn't black, white and red all over
Bookkeeping sounds like a very simple exercise... get the numbers, put them in the right spot. And it can be that simple... as long as all the pieces of the puzzle are there, and they are cut correctly! As simple as bookkeeping seems when you're working with an established system and people that know it well, for novices there are quite a few common mistakes that can grow from a simply misplaced receipt to a full-on business audit! Here are the top eight mistakes businesses make that affect that accuracy, completeness and defensibility of their records... and how to avoid them.

1. Failing to track petty cash Many businesses see petty cash as a fund for expenses that really are too small to be worried about. Who cares about the $2 it cost to buy a new packet of staples, or the $10 tip you gave to the cleaners this week for tidying up after Friday drinks? Eventually, when your yearly petty cash expenditure starts adding up to hundreds of dollars, the ATO will. Fill out a petty cash receipt so your Melbourne bookkeeping service can track each and every expense.
2. Not saving small receipts - No matter what the payment method, all receipts need to be saved or a note of the expense made in a diary. As many businesses fail to do this with small invoices as with petty cash. All those small expenses add up - so save all of your receipts.
3. Not tracking reimbursable expenses Yes, all of the top three bookkeeping sins are related to failing to keep records! You should collate and submit for reimbursement any expenses paid for out of your own pocket at least once a month to help prevent things being 'lost'. To assist record keeping you could try to make payment of all reimbursable expenses from a separate credit card (used purely for business) - that way you can identify any missing receipts from monthly credit card statement.
4. Not reconciling books to bank statements Any small error in bookkeeping can quickly grow out of proportion, as new calculations are based on old figures and balances. Reconciling your books to bank statement will be done automatically by Melbourne bookkeeping services; if you're handling your own accounts, make sure you also do it.
5. Failing to keep a paper trail Try to keep documentation for every step of any transaction. Any place you see a receipt slip, fill it out and take it away. If there's an option to keep a carbon copy, do so. If you have more than one bank a/c (ie. credit cards and cheque account): When writing PAID on the invoice make a note on the receipt of how / which bank account the payment was made from (ie. CC for credit card, Cash if paid from your wallet or NAB if paid by EFT from NAB account) - this will ensure the bookkeeping process is streamlined and efficient.
6. Not backing up your company file Most Melbourne bookkeeping services will back up your company's electronic bookkeeping records at every visit. However, if you do any entry yourself, you'll also need to ensure you do this.
7. 'Abstract' or 'artistic' accounting methods! Issuing cheques out of order... using creative rather than logical invoice numbering sequences... writing some things down and recording others on the computer... all of these eventually doom your bookkeeping to becoming completely indecipherable.
8. Not properly classifying employees To the ATO, it makes a big difference whether you are paying an employee, a consultant or a contractor. It will also be central to accurate bookkeeping, so ensure you know the difference and you agree with your payee as to their classification.