Thursday, August 7, 2008

DIY Bookkeeping – 10 common mistakes

Numbers are boring and so are mechanical tasks; put them together and that perhaps explains why small business owners ignore bookkeeping till it’s the eleventh hour. So, that’s hurrying; and hurrying makes you pay the prices dearly at times. So dollars just migrate from your ledger’s bottom lines to the Tax Office. And it’s a process called audit that stays responsible.

Auditing examines carefully for accuracy of accounting procedures and records maintained by a business. In case mistakes are noted, the only way to rectify them is by paying fines. Thus, to maintain the fine balance between do-it-yourself bookkeeping and avoiding mistakes, you should pay close attention and avoid a few things from occurring.

First of all, it’s the accounting software packages. No two packages are made the same and however simple they might seem; they end up complicating the processes all the more if the user (in this case, the business owners) is not savvy about them. The end result is double (or even triple) the amount of work and desired reports is well replaced by inaccurate bookkeeping records. Before you start using such software, it’s paramount that you have a formal training on the same. Nothing that’s too complicated for a certain level of accounting expertise can make things go better.

Perhaps you have heard about short-changing; those who have not, it is cheating someone by not returning the person enough money. And that person could well be you! Many of the business owners do this when it comes to tax deductions; what can be claimed rightfully is often neglected because accurate cash expenditure records are never maintained.

Now, about the Goods and Services Tax and do it yourself bookkeeping mostly gives rise to three simple mistakes regarding:

• Claim of GST credits against invalid/no tax invoices.
• Claim of GST credits for an entire purchase amount while the goods are used for private purposes and not up to the fullest extent.
• Claim of GST credits when the supplier(s) is/are not registered for GST.

Staying careful on these three aspects can alleviate complications at the time you file your taxes.

Another part often overlooked by self-taught bookkeepers and during a do it yourself bookkeeping session is sending invoices too late. This lets overdue debtors escape despite blocking your money. Therefore, keep track through an appropriate system that shall maintain a list of debtors and the payments due.

The policy of super-annuation i.e. an employer paying 9% of an employee’s earnings (not overtimes) is another source of confusion for the self-taught bookkeepers. The Superannuation Guarantee Legislation still stands as an unclear theory to many of us resulting in over payments. It’s important that the policy is clearly understood.

Missing deadlines often turn out to be fatal for a business; more so when it involves PAYG or BAS besides checking records with the bank. The problem triples since no back-ups are maintained most of the times; this proves even more devastating in case there is a technical breakdown. So how to make all the ends meet?

It’s easier than it seems; bookkeeping mistakes can easily be avoided with the help of a trained professional. Even if you are reluctant to hire a bookkeeper working full time for you, there are many who undertake outsourced accounting jobs; with the
right person to polish your account details resulting from your do it yourself bookkeeping skills, there’s absolutely no reason why we can’t see you as the next millionaire.

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