When it comes to bookkeeping for your small business, you may be surprised to find that there’s a lot more detail than you bargained for! You’ll also end up learning more about the ATO and where your money can end up than you ever thought possible.
So when you’re running a business, there’s a lot to keep in mind for your bookkeeping. And probably more that you need to keep track of, lodge or claim than you expected.
Between learning how it works, earning money and running your business all at the same time, bookkeeping mistakes can easily be made.
We’re going to take you through the most common bookkeeping mistakes that we see for small businesses, and more importantly, how you can avoid them.
Mistake #1: Not Managing Employees Correctly
We’re not talking about how you are as a manager to your employees – we’re talking about the minefield of Super, WorkCover, Single Touch Payroll, Long Service Leave, Minimum Wage, Working Conditions, Maternity Leave and so much more.
There’s a lot that goes into handling this correctly, and if you’ve got a number of employees on different contracts who are employed in different capacities, for example full time vs casual, it can very quickly and easily get messy.
If you’re not compensating your employees correctly you’ll be held financially liable. Not only will you have to pay them back, but pay additional penalties to the ATO. For example, if you fail to pay Super correctly you may be up for the Super Guarantee Charge. And it could leave you vulnerable to other audits from the ATO.
How to Avoid Employee Mistakes
To avoid incorrectly paying your employees, you can find all the information that you need to know on the Australia Government Business website. There are hundreds of articles on here that will help you differentiate between your types of employees and how to pay them to ensure they’re getting paid their wages and entitlements correctly.
The key phrase here is “hundreds of articles”. There’s a lot to know about how to pay employees correctly. And with the introduction of Single Touch Payroll – it means that the ATO sees what you’re doing in real time, so they see mistakes as they happen, and it’s harder to go back and fix them later.
The best thing that you can do to pay your employees correctly is to seek help from a qualified and experienced bookkeeper. They know everything about wages and entitlements and can help you to make sense of employee entitlements.
Mistake #2: Mixing Personal with Business
As a small business owner, you have a lot on your plate. So keeping all your money in one place may just seem easier. You’ll have one bank account and one credit card and you can just keep your business receipts separate.
But it often ends up being a lot more work, and having your personal and business expenses lumped together can land you in a sticky situation.
If you haven’t kept receipts or notes for certain payments, you may be forced to forgo them as personal expenses.
How to Avoid Personal and Business Confusion
If you’ve got a dedicated account and credit card for your business, come tax time you won’t need to scour every statement, highlighting business expenses vs personal expenses. You can simply print your statement and hand it to your bookkeeper to review to ensure that you get the best returns.
The same goes if you happen to be audited by the ATO – being able to present all your information in the easiest way possible is going to make the whole situation a little more palatable.
Mistake #3: Your Software is Not Compatible
There are a lot of bookkeeping software options out there – so it can be hard to choose what’s right for you and your business. Just because it’s the most expensive, or your best friend is using it, doesn’t mean that it does what you need.
For small business bookkeeping, often the most expensive bookkeeping software on the market isn’t going to be suitable for your needs. Quite often the starter packages for software systems like Xero, Quickbooks Online or MYOB can be enough if you’ve only got a few employees and a small inventory.
Using your chosen software correctly is another opportunity for error. Due to the nature of today’s technological world, cloud-based software is always changing and being updated – because it can be done so easily! You don’t need to go out and buy the latest version anymore, they just update automatically when you log in!
So while you may have a good idea of how to use your software initially, overtime it’s going to change and you may not ever know the full capacity of work that it can be doing for you.
How to Avoid Software Issues
Before you commit to a bookkeeping software, it’s best to do your research and even get the help of an experienced bookkeeper.
At Integral Bookkeeping Solutions, we’ve worked with hundreds of small businesses from a number of different industries in all shapes and sizes. So we know what’s going to be best for you and your business.
We have years of experience working with the best quality bookkeeping software solutions (including their many add-ons) such as Quickbooks, MYOB, Xero and Reckon One Bookkeeping. We’re even Xero Gold Partner members!