5 Common Bookkeeping Pitfalls — and How to Avoid Them

Although most entrepreneurs recognise the importance of careful financial management, few want to spend their time dealing with numbers. Unfortunately, not keeping a close eye on your income and expenses can be very costly for a business.

Here are five of the most common bookkeeping pitfalls, and some simple tips for getting back on track.

  1. Mixing business and personal

All too often, entrepreneurs adopt a “buy now, sort later” approach to expenses, using the same credit card for personal and professional purchases. At the end of the month, they’re left poring over statements, trying to sort things out. Mixing business and personal expenses costs extra hours of bookkeeping each month, and muddies your overall financial picture.

Avoid this pitfall by using a separate credit card and bank account for business, and being disciplined about separating expenditures.

  1. Neglecting to track  expenses and keep receipts

Receipt-tracking is a necessary part of business ownership. You need to keep track of receipts to understand spending patterns and effectively manage your company’s finances. And if you want to claim deductions at tax time, you need to ensure you can evidence these deductions.

But far too many business owners take a haphazard approach to collecting and organising receipts—especially while on-the-go. Get the deductions you deserve and simplify tax prep by using an expense-tracking app.  There are a number of apps out there to make it so easy to keep track of your receipts, plus, many of these apps sync seamlessly with your business bank account and accounting software and are ATO approved.

  1. Not taking advantage of technology

Are you still relying on manual or “old school” accounting methods? While basic spreadsheet tools can get the job done, they leave the door wide open for human error, not to mention you are always reviewing your numbers in arrears rather than seeing “real-time data”.

What’s more, manual methods simply can’t match the technological benefits offered by software like MYOB, QuickBooks or Xero. These systems have in-built automation that can track invoicing, link with your credit card and business account, organise expenses, and generate insightful financial reports.

  1. Not keeping accounts up to date

Let’s be frank. Most business owners don’t look forward to that weekly appointment with “the books.”  In fact, many entrepreneurs cite bookkeeping as their most dreaded responsibility and will find a host of reasons to avoid it.  If your books are not up-to-date, you are essentially running your business blindly.  If bookkeeping is not your “forte”, consider engaging a professional bookkeeper.

  1. Doing it all yourself

It is completely understandable for budget-conscious entrepreneurs to try to cut costs by handling bookkeeping on their own. However, taking advantage of a professional help can generate substantial savings of time and money over the long term, and a great bookkeeper will be able to provide you with valuable information so you can have real business clarity.

The biggest pay off? Saving time with these bookkeeping tips will allow you to invest your talents and energy where they will be most profitable.

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