Top Accounting Mistakes Made by Aussie SMEs
Leading financing company OptiPay has revealed the top six accounting mistakes being made by Australian small businesses.
CEO Angus Sedgwick says many business owners view accounting as a chore, yet it is one of the most critical aspects of success.
“We often see owners putting off their accounting responsibilities which leads to varying degrees of negative consequences for their business,” says Mr Sedgwick.
“You only have to look at the fallout from delayed COVID tax payments and the increasing rate of insolvencies to realise the impact this has,” he says.
“The best way to avoid costly accounting mistakes is to hire a professional bookkeeper and accountant. It may seem costly but you’re more likely to save money in the long run than by trying to do it yourself.”
Here are the most common accounting mistakes to avoid -
- Not Tracking Business Transactions
Make sure you keep a record of all your transactions. Have digitised copies and paper backups for future reference and to maintain the health of your business. Don’t forget records of employee compensation, utility expenses and cash receipts. If you’re audited by the tax office you will be required to show records of all your business expenses, even the small ones. Consider implementing financial tools that can help you automatically monitor your business transactions and create a backup in case of an emergency.
- Poor Communication
Ensure that you and your bookkeeper clearly understand and communicate regarding your financial records, reports and any other vital statements relating to your business. They need to know what’s going on - be that small or large transactions, or new finance arrangements or structures. Make sure they have a good picture of your company’s overall performance at any particular time.
- Being Behind on Paperwork
Don’t put off updating your books to the last minute. Falling behind on paperwork is one of the most common mistakes we see small business owners make and if you fall behind on billing customers you may find yourself with a debt that never gets paid. There’s also the risk with other payments being late that you may be liable for fines and penalties from the ATO. Try to prevent this from happening by being organised.
- Not Providing a Clear Budget for Every Project
For every new project you start with your business make sure you have a clear budget set out from the beginning. You don’t want a significant portion of your cash flow utilised unless you’re getting a good return on your investment. Look back on past projects to determine an accurate budget based on what you’ve spent before.
- Mixing Personal and Business Accounts
Mixing business and personal accounts makes it harder to track business expenses and you might miss an expense that could have been a tax deduction. Having a separate business account also gives lenders an understanding of your finances if you’re applying for a loan or an alternate funding options like invoice financing. You want to make sure you maximise your credit score to obtain the best financial solution for your business.
- Being Unwilling to Delegate
Sometimes small business owners are unwilling to outsource essential tasks to save money. This is understandable however eventually you will need to outsource sufficiently in order to scale your business to expand. Focus on what you’re good at doing and pay specialists to handle necessities such as your accounting. Having expert advice will help you to maximise your income and any financial or strategic opportunities whilst also minimising your taxes.
