The five most common accounting mistakes – and how to avoid them
Key points in this article
- Keeping on top of your workload
- Getting the most out of your accounting software
Like it or not, accounting is a major consideration for businesses of any size. Getting your system ironed out early will save you considerable hassle in the long term. Keep out of trouble by avoiding these common accounting errors.
1. Data entry errors
Some bookkeeping methods are more reliable than others – you could use:
- a fancy automated program
- an Excel spreadsheet
- a handwritten ledger.
But no matter what system you use, attention to detail is key.
The most common data entry error is caused be transposition: keying in 95 instead of 59. Less common are transcription errors, or simply hitting the wrong key by mistake.
These errors often go unnoticed because the person inputting the data is in a rush. Dedicating adequate, distraction-free time to the job will lower the potential for costly mistakes.
2. Falling behind
It’s easy to get caught up in other aspects of the business. After all, it seems far more productive to be doing paid work than to have your head buried in bookwork. And it’s tempting to put off those small tasks to a less-busy day – which may or may not arrive.
But investing 15 minutes a day – or every few days – will save you hours of headaches in the long run. Having to untangle a maze of neglected payments and invoices is no fun.
Not keeping records up to date is one of the biggest time-wastes for Australian businesses, according to the Institute of Public Accountants.
Keep on top of your accounting workload to save hours of wasted time later on
3. Failing to separate personal and business accounts
It may seem like a no-brainer, but failing to open a separate business account is a common trap for those starting out.
Keeping all your business finances in one place will make tax time much more bearable. Having a dedicated business credit card will ensure all relevant purchases can easily be accounted for.
Just remember not to use it for non-work expenses, such as groceries. If an accountant sees you’ve misused your business account, they’ll be forced to scour all your transactions for similar mistakes.
It’s a good idea to keep invoices for personal and business items separate too. Whether you store them digitally or physically, having them in one place is essential.
4. Ignoring your accountant
Another huge time-waster is losing touch with your accountant. Almost 60% of surveyed Australian accountants say they’re forced to spend extra time on EOFY statements as a result of being left out of the loop all year.
When you’re making a major business-related decision, give your accountant a call. This is their domain, after all, and they might be able to suggest a nifty cost-saving alternative.
5. Inadequate knowledge of accounting software
The constant evolution of accounting software has simplified life for small business owners. The range of programs on offer means there is something for every budget. But many businesses plough along never really knowing the full capability of their software.
Setting aside some time for training will lead to significant time savings down the track. All good programs offer free online courses to coach you through many hidden capabilities.