The Dangers of DIY Bookkeeping

When cash is tight in your business a DIY bookkeeping approach seems to be the easy answer to your problems. Bookkeepers should be seen as an asset to your business by helping small business owners to keep afloat. monitoring their cash flow, making sure all possible tax deductions are claimed and keeping records up to date to help you manage your business.

Here are five common mistakes made by DIY bookkeepers:

Lack of understanding of accounting software

A lack of understanding of basic accounting principles and complex accounting software can lead to inaccuracies in accounts which can potentially lead to penalties being imposed by the ATO for underpaying tax. A professional bookkeeper will understand the intricacies of the software and what records need to be entered into the system. This will ovoid the costly process of your accountant correcting your books at year end and avoid any tax liabilities which will save you money in the long run.

Missing deadlines for PAYG (Pay As You Go) or BAS

One of the mistakes an owner can make when doing their own bookkeeping is failing to lodge their PAYG or BAS statement on time. This can lead to a Failure To Lodge On Time (FTL) Penalty. Using the services of qualified book keepers will give you the peace of mind as they will keep your records up to date and contact you when they require additional information to lodge your forms on time. You remain primarily responsible for ensuring that the necessary information is with your bookkeeper.

Paying incorrect employee super contributions

The minimum super amount you have to pay is 9.5% of each eligible employee’s earnings base when they are paid more than $450 in a calendar month. Failing to meet your superannuation obligations and non compliance with Australian superannuation laws may result in penalties issued by the Australian Tax Office. A bookkeeper with an understanding of superannuation laws will make sure all your superannuation obligations are met.

Invoicing incorrectly

One of the major mistakes a business can moke is incorrect invoicing or woiting months to invoice, which will put a strain on your cash flow. Incorrect invoicing can be a huge cost to a business in the time lost to try and reconcile the invoice with the product or service purchased and an unpaid bill in the process. Engaging a professional bookkeeping company will ensure that the invoice is correct. is it is issued in a timely manner and chasing overdue debtors, leaving you to the important .sk of running your business

Incorrectly recording items as being deductible when they are not

Kecording items as being tax deductible, ie claiming a full GST credit when an item is partially being used for private purposes such as a motor vehicle, or claiming GST credits when your supplier is not registered for GST. A professional bookkeeper will keep up to date with the changes in tax laws pertaining to your industry and have a full understanding of what items are tax deductible for your business.

Failing to keep back up records

Knowing what records to keep, for how long and ideally recording details in an accounting software package for easy access and transfer to your accountant. However, backing up these financial records is equally as important. Your laptop may be stolen, the hard drive may fail or in the worst case scenario, your house may burn down. Back up storage should be kept offsite in case of o fire or break in. A specialist bookkeeper should hove off-site storage facilities available as part of their service.

The advantages of using a professional bookkeeper will ensure your records are correct and up to date, they keep abreast of changes in tax legislation that may affect your business, keep a close eye on cash flow and help reduce your tax liabilities. Good bookkeeping puts you in control of your cash flow and you can use the updated reports to make important business decisions and forecast the future plans of your business which will offset the cost of a professional bookkeeping service.