Just like everything else, doing Do-It-Yourself tasks almost always result in errors, whether big or small. Especially if it is your first time to do it, mistakes are common in DIY tasks.
Likewise, mistakes are also common in DIY bookkeeping. Amateur bookkeepers – who are mostly business owners who are not trained bookkeepers and do their own bookkeeping – in one time or another, have experienced making mistakes in their bookkeeping.
Though DIY bookkeeping practices do not necessarily result to mistakes; however, bookkeeping is a vital aspect in one’s management decisions. Business operators who do their own bookkeeping should possess the necessary skills and time to undertake the process properly.
So if you are considering doing the bookkeeping yourself, here are some of the most common DIY bookkeeping mistakes and hopefully, in knowing these mistakes, you will be able to avoid them in doing your bookkeeping:
1. Using of too complicated accounting and bookkeeping software. Usually it is a common misconception that when we use the most complicated software, we are guaranteed of a successful end result. That is a BIG mistake! Using of this too complicated software can result in lack of understanding on how to use them. This could lead to inaccuracies in your bookkeeping and may ultimately result in confusion and mismanagement.
2. Incorrect recording of items as being tax deductible when they are not. Claiming for a full tax deduction when an item is partially being used for private purposes such as a motor vehicle, or claiming GST (Goods and Services Tax) tax deductions when your supplier is not registered for the GST is the most common result due to incorrect recording. The ATO requires valid tax invoices to claim GST. Likewise your supplier needs to be registered for GST and you need a valid tax invoice to claim GST credits.
3. Missing deadlines for PAYG (Pay As You Go) or BAS (Business Activity Statement). BAS is a form submitted to the Australian Taxation Office by all businesses to report their taxation obligations. Failing to lodge their PAYG or BAS statement on time can lead to a Failure to Lodge on time (FTL) penalty.
4. Incorrect and Late Invoicing. Incorrect invoicing or waiting months to invoice can put a strain on your cash flow as well as let overdue debtors fall through the cracks. Incorrect invoicing can cause a huge outlay to a business with regards to the time lost in trying to reconcile the invoice the product or service purchased and may also result to an unpaid bill in the process.
5. Incorrectly Paying of Employee Super Contributions. Failure of meeting superannuation obligations and non compliance with Australian superannuation laws may result in penalties issued by the Australian Tax Office.
6. Failure to Keep Back-Up Records. If you are using a computer system – it’s essential to back it up. Losing these records may prove disastrous to your business as these records are essential for the smooth running of your business as well as in keeping up to date of your business transactions and keeping a close eye on your cash flow.
Overall, just like any mistakes, there are consequences. Errors in bookkeeping can, in the long run, lead to disruptions in your business – whether great or small – that may ultimately cause major business problems and difficulties.
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