The top 9 mistakes in DIY bookkeeping
What better time to put your end of financial year processes under the microscope. After all, it seems that bookkeeping is either a task left in the ‘to do’ basket until it’s too late or done at the last minute, increasing the likelihood of mistakes.
Many small to medium business owners are often juggling a variety of tasks from managing staff and business developments through to hands on work.
However, simple bookkeeping mistakes can cost a small business thousands of dollars, money better seen on the bottom line. They can also expose owners to substantial fines if uncovered by a Tax Office audit.
So here are some of the common pitfalls, or what I call the top ten mistakes of DIY Bookkeeping.
1. Using computer software that is too complicated for your level of accounting expertise. Some software programs are too complicated for most business owners who don’t understand double entry accounting. As a result, you could potentially leave yourself with a ‘shoe-box’ packed with information that will either expose you to risk in a tax audit, or require your accountant to spend extra time and money sorting out.
2. Short-changing yourself by not claiming valid tax deductions. Many business owners often ‘short-change’ themselves of tax deductions they can rightfully claim. In most cases this is a simple oversight such as not keeping accurate records of cash expenditure.
And here are three common and simple mistakes when it comes to VAT. It’s easy to fall into these traps, but also quite easy to avoid them.
3. Claiming VAT credits without valid tax invoices
4. Claiming VAT credits for full amount of purchase when goods are used partially for private purposes
5. Claiming VAT credits where the supplier is not registered for VAT
6. Not invoicing quickly and letting overdue debtors fall through the cracks. A lack of time can mean that business owners take weeks or even months before getting their invoices out to their customers. This sends an implied message to customers that you don’t care about getting your money.
Also, make sure that you have appropriate systems in place to keep track of debtors and follow through on payments due. Allowing outstanding debtors to fall through the cracks can put enormous strain on your cashflow.
7. Missing deadlines. Missing these deadlines puts unnecessary pressure on you and your business.
9. Failing to check records with the bank to ensure accuracy. This goes without saying, but is often overlooked.
10. Failing to keep back-up records. Many business owners need to show more vigilance in ensuring back-up copies and systems are in place to safeguard their financial files in case of a technical breakdown. Just imagine the information you could lose!
Article also published on author site: http://www.wayneburgan.com/ and adapted for the UK