Starting a small business is a whirlwind of turning your passions and talents into a flourishing business. You’re likely learning the ropes of marketing, procurement, recruitment, and more to keep your entity afloat.
While the above areas matter, it mostly boils down to an infallible accounting strategy that keeps your business profitable and moving forward.
Join us as we outline seven common mistakes and delve into solving them!
- Lack of Financial Separation
Categorising your finances not only makes it easier to locate specific transactions but also prevents professional and personal finances from mingling. Where possible, manage personal expenses in a totally different account to give a clearer overview of your cash flow.
Consider separating finances into the following:
- Income for goods and services
- Goods and services tax (GST)
- Personal finances
- Business expenses
- Emergency funds
You can further categorise business expenses between overheads and utility bills, making finding receipts for deductible expenses easier.
- Forgetting Bank Reconciliation
Good bookkeeping practices are fundamental to smooth and efficient financial management. Reconciling your banks once every six months can make the process more complex. If there are any discrepancies, it’ll be much harder to retrace transactions and reclaim the right data.
Consider balancing your books at least once a week to save time and resources. Accounting software like Xero can make this task a lot easier.
- Neglecting Tax Preparations
Tax preparedness encompasses several components, including:
- Accurate names and addresses
- Sufficient funds to pay income, fringe benefits, and goods and services tax
- Updating business activity statements (BAS)
- Submitting PAYE instalments
- Making superannuation contributions
- Complying with deadlines
- Applying relevant deductions
A lack of organisation could lead to implications, such as penalties and a long-term record of non-compliance, which could reduce room for negotiations if you move onto an ATO payment plan.
While working with an accounting agent can streamline appropriate saving strategies, you can take the lead on updating registered details and fitting document updates into your weekly schedule.
- Losing Track of Accounts Payable and Receivable
It’s surprisingly easy for businesses to let unresolved invoices go under the radar. Lengthy invoice deadlines and poor payroll management are often to blame.
Cash flow is vital if you’re to maintain your business. Consider using a digital invoice with an instant or short-term deadline and follow-up framework that prevents late payments. Doing so will improve visibility over your business’s financial health, enabling you to make impactful financial decisions.
- Registering Employees and Contractors Incorrectly
As a small business, you may hire just a few internal employees and outsource other specialist roles like IT or content creation. You must differentiate the legal requirements connected to both parties to prevent penalty-related implications.
You must first distinguish employees as full- or part-time members and record their pay accurately for income tax purposes. Then, you must lodge PAYE monthly instalments and make super contributions of 11% or more.
For contractors, you should submit a TPAR highlighting payments made for services received.
- Not Collaborating with Certified Accountants
Working with chartered accountants and qualified bookkeepers can help you mitigate all the mistakes listed above. Their expert understanding ensures you optimise your tax savings, comply with all financial regulations, and order your funds so they’re better to analyse, aiding business growth.
Connect with our professional team today for accounting and advisory services you can trust.
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