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The Eight Most Common Bookkeeping Mistakes

In this article, we are going to be looking at the eight most common bookkeeping mistakes to avoid. From small businesses to large corporations, bookkeeping is an integral part of any business. The job of bookkeeping might not be the most alluring profession, but it is necessary to keep a business running smoothly. Committing even the smallest of errors can cost a company greatly.

The Eight Most Common Bookkeeping Mistakes

  1. Combining Personal and Business Checking Account: Your business checking account should be a separate checking account not mingled with your personal checking account. This is an eyesore to the IRS and to any sophisticated investor, because when you mix the two, it’s very hard to account for what is business and what is yours. If you had a separate checking account now, it doesn’t mean you should run into your bank and ask for a business checking account because they’re going to give you a checking account with a lot of fees and a lot of services that you just don’t need. So just go in and ask for another personal checking account, they’ll be happy to open it because every checking account that you open with them is another source of income for them.
  2. Doing Bank Reconciliations: Bank reconciliation is when you balance your books to what the bank says. When you say this is the activity I had for the month and it matches what the bank says. This is very important for many reasons, because the bank will actually be more accurate than you may be in your books. Your bank reconciliation will reveal any data entry errors you make, such as double or missing entries forgetting to put a check in your check register or writing one number down and entering it into your check register another way and then by going over and reconciling or doing what we call bank recs, you will find these areas in your books will be more accurate.
  3. Keeping Your Receipts: These sounds like hey how can this be important, but unless you’ve been audited by the IRS, it’s really hard to grasp the importance of keeping receipts. Many people believe that you can just track these expenses through your bank statement or your credit card statement. But that’s not necessarily true, because your bank statement or your credit card statement or your credit union statement will say you spend so much on this and here’s where you spent it. Here’s the amount but the auditor will say how do I know this is personal and not business. That’s when you pull out the little paper receipt.
  4. Shoebox Bookkeeping: If you want to know what you are doing wrong in bookkeeping, then ask yourself if you are doing shoebox bookkeeping. This usually involves taking an empty shoebox and putting your financial paperwork in the box.
  5. Manual Systems and Spreadsheets: A manual book system and spreadsheet is a good way to track financial information. However, spreadsheets fall short when it comes to tracking where your funds come from and go to.
  6. Not Being Involved: Not being involved in the business of bookkeeping of your business would be a big mistake. Be involved and learn. Even if a professional accountant sets u your bookkeeping system, you should know it in and out.
  7. Lack of Digital Bookkeeping: More and more financial trails and transactions occur through digital mediums. Your bookkeeping system should be equipped for this. There are a variety of accounting applications that synchronize with your business’s mail and shopping cart to provide a streamlined bookkeeping system.
  8. Improper Classification of Employees: One of the mistake business owners make with bookkeeping is not classifying their employees properly. This happens when a business has both employees working directly at the office and independent contractors. To avoid paying too much tax, it is necessary for these employees are classified properly.

It is important to look at your business and determine if any of these mistakes applies to your business so as to effect changes where necessary. You can turn the bookkeeping task into something that would result to a positive change in your business by going through the eight most common bookkeeping mistakes I have talked about

8 Qualities to Look When Choosing Your Small Business Bookkeeper.

Having the best bookkeeper is an important aspect in a small business. This will ensure that you are secure about your financial status of the business and hence concentrate on other important activities in growing the business. Therefore, it will help in ensuring the growth of the business. Poor bookkeeping is one of the main reasons why businesses fail. It is, therefore, an essential thing to find the right bookkeeper. The following are attributes you should always consider when selecting your bookkeeper whether a company or an individual.

Bookkeeping is a continuous process which involves your company’s financial data and other essential data. A bookkeeper who is not reliable may bring confusion into your business. To ensure that the bookkeeper is reliable, you can ask for references who have their bookkeeping always done by the bookkeeper and can ensure you that the bookkeeper is reliable.

  • Good communication.

Most bookkeepers are always good with the paperwork but and very poor when it comes to communication and relating to others. You should ensure that the bookkeeper you choose can listen carefully and also speak out when there is a misunderstanding.

The bookkeeper you choose should have enough information on the bookkeeping process and also your company’s activities. A background in accounting or related courses may have to be considered to ensure they have technical knowledge.

It may seem obvious that all bookkeepers are organized. However, there are some who may not be organized and hence you should not assume the aspect of the organization when choosing your bookkeeper. A poorly organized bookkeeper may cause a lot of confusing and losses in your business especially if they are dealing with multiple clients whereby they may end up mixing data from different companies.

  • Gives you the priority.

The bookkeeper you choose should always prioritize your business. This means being there for your business, respecting the business, being keen on the finances and ensuring they do their best to ensure your business success.

  • Up to date.

The bookkeeping company should be using the current technology and current accounting practices. The employees should have necessary skills to do the work. Before you hire a bookkeeper, ask them on how they ensure they are up to date with the technology and ensure their customers have the skills required.

Some bookkeepers are not honest and yet it is a very critical quality. When a bookkeeper tells you that there is no problem in the business and yet there are a lot of problems may affect the growth and success of a business.

  • Professional expertise

The bookkeeper you choose should have a technical background in bookkeeping. This does not necessarily mean a college degree. It may also include previous experience in bookkeeping. You will know this by interviewing the candidates.

From the above qualities, I believe you can be able to choose the best bookkeeper for your business. You are also able to be keen on your bookkeepers knowing they form a critical part of your business success. Visit this site for more information : Bookkeeperco.com.au

4 Reasons to use Bookkeeping service for your small business

Many small business owners are usually hesitant to hire a bookkeeper who provides bookkeeping services to track their expenses, and it is hard to argue with the premise that every small business should budget for bookkeeping services. The rates are usually so reasonable that start-ups can afford to hire one and grow with the bookkeeping services as their ventures grow. Here are the four reasons a small business should get bookkeeping services:

Opportunity Cost

That it takes thetime to keep your books is the bottom line, and this isthe time that you could be spending on some other areas of business. If you are not so familiar with software that assists with bookkeeping or you are not an accountant, it will take you much higher time than necessary to enter transactions into your ledger if you perform the role of bookkeeper. Think of cost not only regarding the amount you would save doing this yourself but also how much more you could earn for your business if you were not spending time keeping books.

Accuracy

In hiring a bookkeeping service, you are employing an individual who has accounting experience or even a certified accountant. These people know how to enter and classify your transactions, which not only helps keep your books accurate but also pre-tax planning. When you do bookkeeping yourself, you may find a certain amount of procrastination is natural, like getting busy and failing to close your books on time. A person employed for the sole purpose to be a bookkeeper will less procrastinate, check more often and usually do a better job.

Conflict of Interest

You could be in a business partnership or a business arrangement where there is more than an individual with interest in accounting. Even though you may think a great business relationship exists, these relationships can quickly turn sour in case there is any accusation of misconduct with bookkeeping. Even an unintentional error at the hands of one person could cause a serious rift in the business relationship which is unrepairable. Using a third party to carry out the bookkeeping transactions can help take the potential conflict of interest out of the situation.

Outsourcing

Today, hiring an in-house bookkeeper or accountant is no need. If your transactions demand a full-time dailyaccountant, then, it maybe the time to seek one. If you however simply need someone for a few hours a day or few hours a week, outsourcing the job is something you should consider. It will save you money on benefits and salaries to the individual. With advances in technology, you can even easily share files with a third party accountant quietly and efficiently, and you do not necessarily need to have an accountant in the office as you can easily access an online bookkeeper.

All the above advantages give you a reason to hire professionals to handle bookkeeping services, and you can then concentrate on your business and do what you do best. Dealing with Australian tax issues and keeping records n case an audit was necessary are just two services that can make bookkeeping a wise move in the Melbourne area. It is so easy to find the service as there are so many bookkeepers Melbourne. Visit this site for more information : Bookkeeperco.com.au