3 Bookkeeper Mistakes To Avoid

While majority of bookkeeping tasks tends to be repetitive, it does not necessarily guarantee error-free results. When mistakes become habitual and the bookkeeper does not make a conscious effort to correct, you are about to face a more serious problem with your business.

You might have dealt with more complex transactions that require a bookkeeper’s expertise, but you only paying fees and penalties because the bookkeeper did not finish the task you assigned. As a business owner, you need to remain vigilant so you can spot the mistake before it worsens.

Business owners are expected to have basic knowledge of bookkeeping or accounting to know what is going on with the transactions. If you do not know how to manage your money, you are not far from going broke eventually. You do not have to acquire the skills of your bookkeeper or accountant to fully understand the information they dish out. As you learn the ropes, you will begin to gain a basic understanding of how bookkeeping works.

Bookkeeper Problems and the Solutions

1. Not addressing the task at hand: The problem starts when your bookkeeper is habitually taking essential tasks for granted. When the tasks are not being addressed, it can either be due to limited time or inefficiency. This can be avoided by checking with your accountant how much time they estimate should be spent on a weekly basis in order to finish the task. You will also have to provide the right resources to ensure that the job is completed successfully. Make sure your bookkeeper keeps you abreast of the unfinished tasks regularly so you will know which work has been prioritised and which ones need extra attention. Being aware of the progress of the task you assigned will help you determine if your bookkeeper needs additional hours or resources.

2. Not recording or archiving: Your bookkeeper is required to keep all your invoices and receipts for legal purposes. In theory, receipts must be filed and archived between 5 and 10 years. This enables you to support your case in case you need to sue or you are sued. If your bookkeeper keeps on forgetting about filing or archiving essential receipts, you need to create a document filing system. It will also be a great idea to go paperless so you can save office-space. Choose a bookkeeper that will give you access to the information you require especially for tax filing.

3. Not coordinating with your accountant: The task of your bookkeeper differs from the task of your accountant, but this does not mean they cannot work together. In fact, if 90% of bookkeeping tasks are repetitive, the bookkeeper should collaborate with your accountant when dealing with 10% of complex tasks.  When your bookkeeper is not coordinating with your accountant, it can result in various problems such as payroll and superannuation errors. Make sure a strong line of communication is enabled between your bookkeeper and accountant so both parties can complete tasks and prevent costly mistakes.

Why Should Bookkeepers Adopt Cloud Technology?

In this day and age, cloud-based services are undoubtedly sitting on a throne, due to their positive effects on day-to-day tasks. In the past, businesses dread cloud technology because of the cost that it entailed. However, there are cost-effective ways to embrace cloud at reduced cost and this is when many businesses decide to make the switch. Perhaps, you are one of those who is still hesitant to move towards the cloud because for one, you fear the lack of control and cost unpredictability.

Since there are many service providers to choose from, you are not limited to expensive options. In fact, you can choose a cloud-based service that offers flexibility without the price tag. How is cloud technology going to help you with your bookkeeping task? Contrary to popular belief, cloud-based services do not necessarily replace human capabilities because they are designed to increase productivity so more tasks are carried out. Here are some additional benefits you can obtain from cloud:

Accessibility

Monitoring every business transaction is essential to keep your finances intact. However, real-time monitoring will not be possible if you are chained to your desk. With cloud accounting and bookkeeping solutions, being tied to your desktop computer is a problem of the past. Cloud-based bookkeeping gives you the ability to gain complete access to data anytime, anywhere and with any device. All you have to do is to use your smartphone to access the data.

Secure Sharing

Traditional bookkeeping can give you a headache especially when you need to share some information with your accountant, banker and business coach. Cloud technology provides you easier and more secure way of sharing the information without emailing reports or data. As a result, you save more time and ensure that people you want to share your financial report with obtain the information.

Work Online and Offline

Hybrid cloud services offer the best of both worlds. If you are connected to the Internet, you will be able to reap the benefits of online bookkeeping such as sharing with bookkeepers and accountants, centralised data and manage backups. When you sync your data, you will still be able to work offline and maintain productivity.

With the convenience that cloud service offers, business owners should not hesitate to tap into this technology. Aside from keeping your records safe, you will also enjoy full access to your files or data anywhere you go. Your business will also exponentially increase availability with the use of cloud-based software. Aside from saving time and effort, you will also enjoy accurate function that makes record-keeping a breeze.

How Do Businesses Trigger ATO Audit?

A business owner should pay serious attention to every transaction taking place in the company as tax mistakes can trigger an ATO tax audit. According to the ATO’s compliance program, they are going to be more active in reviewing and auditing practices. It is still possible for ATO to select your company for review despite detailed and honest declarations. When it comes to quick audits, the ATO completes an audit within 28 days. However, if it is a complex audit, the process may take up to 3 to 4 years. The process involves face to face meetings with the ATO and the financial records for up to five years will be requested. You may have proven your lodgements correct, the costs incurred are still considered significant. Being aware of the factors that can trigger ATO audit will not only save you from trouble but also help you develop some positive bookkeeping habits for your business.

Poor Record of Lodging Returns

Record-keeping is essential when it comes to filing tax returns. Compliance obligations are as equally important as lodging annual income tax returns by the due date. Compliance obligations may include employee related reporting, activity statements and fringe benefits. Having a good compliance history can improve the ATO’s perception of your business.

Not Paying the Right Amount of Superannuation to Employees

If you have failed to pay your employees the right amount of superannuation, they are going to complain to the ATO that will trigger a review or audit. The same is true when you fail to pay superannuation on time. These audits are considered a review of superannuation guarantee obligations, but it can also escalate to fringe benefits, GST and income tax audits. When you have not appropriately managed these processes, the ATO will audit your business.

Discrepancies with the Information You Lodged With the ATO

This is the most common triggers of an ATO audit or review. Some discrepancies may include BAS and Payment Summaries on gross wages and PAYG withholding, income tax return and BAS on total expenses and sales and an income tax return and an FBT return on employee benefit contributions.

International Transactions

Your business should also focus on international transactions because the ATO also considers this as a key area of focus. Some examples are transactions with international related parties, materials funds transfers in and out of Australia and transactions with tax havens. These transactions can raise a red flag and one way you can manage the risk is by devising defensive strategies.

Tax Mistakes That Can Put Your Business In Peril

If you are afraid of incurring additional expenses, you will surely allow bookkeeping to take a backseat and carry every responsibility for your business just to save money. However, skimping on bookkeeping, would mean that your business is not immune to mistakes and it can certainly affect your business during tax time. There are many mistakes that small business owners often commit but these three are the most common.

Late payments

Some business owners make a payment when they file their tax returns but this is a common mistake many businesses commit. Owners are supposed to make quarterly estimated tax payments and should be mindful of the due date. When payments are not made in a timely manner, you can trigger an audit from the ATO and this will result in paying tax penalties and interest charges once you file your tax return.

Misclassifying employees

Determining whether an individual should be considered a contractor or an employee is not as complicated as some small business owners may think. You will need to take a few points into consideration because misidentifying a person can lead to interest for non-payment and penalties in terms of employment taxes.

Poor Record keeping

Although you might be tempted to make a mental note of every transaction for the belief that you can retrieve information instantaneously, this habit can do more harm than good. There are instances when businesses mix personal with business expenses and this can really spell trouble. When you rely on bookkeeping in a shoebox, it can have a serious effect on your business as there is no way to find out whether the numbers on your report are accurate. The numbers can either be lower or higher than the expenses you have incurred.

These mistakes can still be corrected by ensuring that you keep tabs on entertaining and travel expenses. So long as business was discussed, you can deduct the cost but you need to write notes on the receipt and indicate the people you were meeting with and the business that was discussed. When it comes to filing, you can also ask for an extension if you need more time. However, extra time to file will also mean extra time to pay. You need to set your expectations because you will surely owe money and you need to estimate the money you owe for the extension. It is quite challenging to keep track of your business but you cannot afford to make these mistakes as they can impact your taxes.

What Does Your Financial Health Look Like?

It is not enough that you run a profitable business as you have to make sure that you keep an eye on your business’s financial health. There are some key questions that you need to answer for you to verify if it is time to make some changes to your current business strategies. Your business may be doing well, but without a financial statement to give you an idea of your financial standing will still result in business losses.

Do you accomplish your monthly goals?

One indicator that you are on the right track is when you hit your monthly targets. You can determine if you are ahead or behind your monthly goals by comparing your month-to-date sales. Your expenses with your end-of-month goals are also worth checking because they also play an important role in your business. This technique can be used for you to find out if it wise to grow your business.

Are you falling behind your payment schedule?

Your accounts payable and cash balance must also be taken into consideration and a profitable business does not give you an assurance that you have nothing to worry about. Keep in mind that a profitable company also runs out of cash, but you can still prevent problems with payment schedule by ensuring that you keep your monthly burn rate and major payables in check. With this technique, you will be able to pay your bills on a regular basis.

Do you have a steady cash flow?

If your business always faces problems with cash flow, this is a cause for alarm because a negative cash flow can greatly affect your business. Problems with cash flow indicate that you are not regularly monitoring your expenses. You can prevent issues with cash flow by tracking monthly ongoing expenses and making a comparison of last month’s actuals to your projections. Make sure you involve your bookkeeper in your discussion so you will have an idea if there are still some parts of your business that needs improvement.

Is your cash enough to keep the business on its feet?

Having enough to get to break-even is also essential because this is deemed as a major milestone where adjustment and regular monitor are required. Your net profit and business plan projections must be checked regular as these can give you a better picture of your financial health. A bookkeeper should prepare a financial statement for you to review. If you do not have enough cash, cutting your expenses is one way to raise additional cash.

5 Tips For Organising Receipts For Tax Time

If you are a savvy business owner, you will surely know the importance of keeping receipts. As you spend hours organising receipts, you will realise that the effort and time you dedicate pay off because these receipts can save your tax return from being in peril. While receipts may just be a piece of paper, it is considered valuable and should be taken seriously because it serves as audit protection. If you do not comply with the strict substantiation requirements of the ATO, it can create a problem in the future especially if you do not have records to prove that the expenses you incurred are indeed business-related.  You may end up left out in the cold if you fail to follow rules.

1.    Keep your receipts

Without a doubt, keeping all receipts cannot be overstated. Receipts are going to play an important role when arguing with the ATO because receipts are going to be your credible evidence. When you argue with the ATO without showing credible evidence that the expenses you incur was business-related, arguing will cost you more money and time.

2.    Scan receipts and keep them for future audit

The ATO may request for documentation and audit you up to six years so it is worth keeping your receipts at least six years so you will no longer face issues during an ATO audit. If you scan your receipts, make sure you keep a back-up as hard drive crashing can be inevitable. Once the ATO makes an audit and you have no evidence to present, they will definitely not buy your excuses.

3.    Indicate on receipts about their business purpose

If you have entertainment or dining expenses, it is a good idea to make notes of their business purpose. It is hard to remember why you went to dinner at a restaurant two years ago but if you have already made notes of the purpose, there is no need to panic.

4.    Keep a daily journal for your business

Although it may be an additional task that can contribute to your busy schedule, keeping a daily business journal can be a huge help especially when you need track some expenses you incurred in the past. Never underestimate the daily journal because they can save you from paying tax penalties.

5.    Don’t rely on cancelled checks and credit card statements

Although these are important they can still be considered insufficient without receipts. Receipts are going to be ideal for bookkeeping purposes because these are the details that are considered essential by the ATO auditor.

What Exactly Is A Cash Flow?

Although the cash flow definition is pretty straight forward as it is simply the money that flows in and out of your company, it is still considered as the most important aspect that every business owner needs to pay serious attention to. It can be compared to a checking account ledger where deposits and withdrawals of cash flows are reflected.

However, many businesses fail to keep track of their cash flow that it is already too late to discover they have negative cash flow during the first year of their business operation. Negative cash flow refers to the decline in the cash balance over a particular period of time. Although it differs from negative cash balance or bouncing checks, negative cash flow also has a deleterious effect on your business.

Although negative cash flow can happen from time to time, it is still essential to monitor it because when the time comes a business owner wants to grow the business, get loans and attract investors, there is an assurance that the business has a healthy cash flow.

Cash Flow Statement

A cash flow statement provides you details of the changes in the cash balance. This statement is used for recording cash flow projection, which is helpful in forecasting the future of your business’ financial aspect. When managing and growing your business, it is important to have an up-to-date cash flow plan. Even if you have a bookkeeper to take care of your cash flow, it is still important to understand cash flow so you will know the difference between cash on hand and the money you are owed. One of the reasons for bankruptcy is the delay in paying receivables. Delayed payments only mean that a company has trouble handling operating expenses.

Your business can increase the possibility of success with good cash flow management. Hiring new employees, making inventory purchases and spending money on office improvements are just a few of the benefits of a positive cash flow. A company will have trouble acquiring new leads due to managing cash flow poorly. This is why business owners must see to it that cash flow is monitored on a regular basis.

If there are future problems with cash, forecasting cash flow will help a business owner identify them. Both bookkeepers and business owners will have an ample time to make plans in advance so problems do not create an impact on day-to-day activities. Even when cash is tight, having a solid understanding of the best time make pay outs will make a difference.

Common Bookkeeping Problems And Their Solutions

Bookkeeping is often avoided because of the responsibilities that it entails, but in the long run, business owners consider bookkeeping a necessity. Everyday, business owners are plagued with too many worries, most of which is due to the issues with their finances left unchecked. When you intend to expand your business, its financial aspect is the first thing you need to check. Is it effectively managed? Do you have enough cash to grow your business? These questions are going to be relevant because they will provide you an insight on the direction you are going to take.

5 common bookkeeping mistakes and ways to deal with them:

1.Not reporting sales tax. It is a common effort in bookkeeping to neglect sales tax, but this oversight can create a serious problem in the long run because it is a common reason for penalties and fines. If you have incorrect data entry, your business can suffer from a higher total sales amount. Make sure you have accurate sales tax. Discuss these important details with your bookkeeper if you see any discrepancies in the financial statement.

2. Poor communication. Another reason your business suffers is when you and your bookkeeper do not have strong communications. It is necessary that you keep your bookkeeper integrated and involved with your business activities. This way, your bookkeeper will be able to create financial statements that reflect your business’ true operational needs. Discuss the means of communication which both of you can be comfortable with.

3. Inaccurately tracking expenses and income. A bookkeeper should have the knowledge of formal bookkeeping practices. If the person you hired knows nothing about these tasks, you will have difficulty identifying the category that your income and expenses fall under. When you have accurate records on a monthly basis, you are not only encouraging proper filing system but also ensure consistent and clean records.

4. Poor record keeping. Receipts and other important documents must be kept because they are going to play an important role to your business. When accurate records are maintained, there is an assurance that you are saving time and money on your income taxes. You will have proper documentation if your business will be audited by ATO. You will also have accurate records to present and prevent a possibility of tax penalty. The records must be checked on a regular basis to ensure that there are no irregularities. A bookkeeper should consistently provide a report that a business owner can check and interpret.

5. Mishandling petty cash. One of the reasons business owners have problems with keeping track of expenses is due to bad petty cash management. You can prevent losing track of your petty cash if you set up a system, which will allow you to track the cash. You can also buy a petty cash lock box, which you can use for keeping receipts.

Do You Need A New Bookkeeper?

A bookkeeper is going to be an essential entity of your business. They are responsible for ensuring that the financial aspect of your business is well taken care of. Some examples of tasks that a bookkeeper needs to carry out include filing tax returns, lodging timely payments, keeping receipts and releasing correct reports. In short, a bookkeeper makes the life of a business owner easier. However, when a bookkeeper fails to deliver on the tasks it promises, it is about time you rethink things.

A business owner may need to face the consequences of hiring an efficient bookkeeper if the problem is not addressed right away. There are warning signs that allow a business owner to identify the signs of an inefficient bookkeeper.

1. Financial reports are not submitted in a timely manner.

The financial report is one of the paperworks that a bookkeeper needs to keep an eye on. This report is time-sensitive because this is where business owners determine which direction their business is heading. When this essential report is not submitted in a timely fashion, the business owner is denied of the chance to go over it. When late submissions become a habit, you need to find out the underlying causes for these delays. Is it the lack of resources that deter a bookkeeper from submitting reports? If so, both bookkeepers and business owners must explore viable solutions.

2. The bookkeeper does not schedule a meeting to discuss financial reports.

An access to the financial report is important so you will keep track of your financial activities. When there is lack of information, a business owner will not know about the steps that need to be done in order to resolve bookkeeping issues. You have the right to know about the details of the financial report so you will be confident that ATO receives correct and accurate information about your business. Scheduling a meeting also allows you to correct mistakes, which can wreak havoc on your business especially when it comes to filing tax returns

3. Your bookkeeper is no longer committed to your business.

Commitment is important for a bookkeeper to succeed in carrying out bookkeeping tasks. Without commitment, a bookkeeper will feel as though the daily task is an obligation. When a bookkeeper is committed to helping your business get bookkeeping tasks done, a business owner will no longer have to worry about them.

4. Frequently receiving mails from ATO.

When mails from ATO are received frequently, you need to conduct your own investigation so you will know what really is going on with your bookkeeping task. Essential details must be handled properly and recorded on a regular basis. You may need to schedule an appointment with the bookkeeper so you will know what is going on with your finances. If they cannot provide satisfying answers, you may need to look for a more reliable bookkeeper to do the job. Your business is more likely to suffer if you are going to allow an inefficient bookkeeper to take care of your financial activities.

Understanding Your Finances: Why Such A Big Deal?

The financial aspect of your business should be taken seriously because mishandling your finances can impact your business. Financial management includes accounting, bookkeeping, raising capital and cash flow management. Even if you are a small business owner, you need to make sure that your daily operations are monitored closely because one wrong move can make your business suffer. Although it is not a requirement for business owners to spend years studying the ins and outs of bookkeeping and accounting, understanding where money goes can make a difference.

3 Common Mistakes That Business Owners Commit When Handling Finances:

Careless spending. Avoid overlooking expenses because if there isn’t enough money to cover all of your business expenses, you will not be able to move forward. When you do not monitor your expenses, there is a tendency that it will pile up. When the time comes you need to make a payment for your bills, you lack financial resources to obtain cash from. Business expansion will not be impossible if you can deal with business expenses without worrying about falling behind your payment schedule.

Delayed payment of taxes. Taxes are essential to every business and it is important that you pay them in a timely manner. Since late payment of taxes can have a negative effect on your business, you need to create a financial plan in advance so you can keep track of your payment schedule and pay taxes.

Poor cashflow management. Managing your cashlow is also important and this should involve monitoring payment for insurance, phone, rent and many others. When you plan ahead, you will be able to know potential problems even before they arise. You should also be aware of cash flow gaps because they can also happen at some point.

Managing the financial aspect of your business is not an easy task especially when you need to take your financial obligations into consideration. Delayed payments are a sign that there is something wrong with your finances. You have to review or reassess your spending habits so you will know what could have gone wrong.

If you are struggling with your business finances due to mishandling your cashflow, it is time to identify the culprit behind because taking these problems for granted can have a negative effect on your business that is beyond repair. Your bookkeeper can help you put your business in proper perspective and help you maintain your cashflow so you can make timely payments and prevent your business from becoming a complete failure.