common mistakes in accounting
10 common management mistakes in accounting for businesses
1. ” a good business owner does not run a business blindly with out knowing your accounting scoreboard”
For those of you that know our firm, you would most likely have heard us stress the huge importance of a business having accurate and timely information to control their business costs, cash flow, margins and profitability.
Updated accounting information is no doubt a vital discipline ensuring and business knows its current performance. Just like at a sporting event you know the score, the same with the business, you need to have a live scoreboard. Without a live scoreboard a business runs perilously and blindly – obliviously to whether it is travelling well or performing badly.
other Common Accounting mistakes we see include:
- Doing all of your accounting yourself without proper training. Commonly we have seen people make a major investment in new businesses and scrimp on accounting, putting your investment at risk. Poor accounting means neglecting your business. How would you feel if the scoreboard was saying the wrong score at your favorite sporting event grand final, causing you to be misled and take the wrong actions because you have the facts wrong?
Have someone capable of doing your day to day data entry, reconciliations, cash flow management, payroll, creditors, debtors, BAS returns and regularly looking at accurate financial performance reports.
This information gives you more control of your business.
- Using spreadsheets rather than professional accounting software. The disadvantages of a spreadsheet is that you usually have to evolve them to meet your business needs. They will probably never work as well as accounting software . Spreadsheets are likely to be less accurate, meaning deductions may be missed. They also are unlikely to integrate the whole suite of features professional accounting software can. Software combine bank feeds of all transactions, debtors, creditors, reports, bas returns. You should have an accounting professional guide you to the right accounting software for your business.
- Chasing sales and not profit. Over focusing on sales and not keeping an eye on costs as well is a common management mistake. Profit is more important than sales. Although sales growth can be critical to the success of the business.
- Establishing a framework for collating all deductions and reporting GST. Having simple bank accounts and spending all the money through the business bank account is a fundamental way to ensure all your deductions and expenditure and GST paid is recouped and counted. Don’t let poor systems cost you in tax and GST.
- Accurate and disciplined systems to prepare & send sales invoices. Ensure you are never too busy to send invoices or even worse forget to send an invoice. Have a system to minimise bad debts such as sending statements in arrears letters.
- Use budgeting for business growth. Often businesses want to grow but don’t have a month by month budget plan on how to get there. Budgets are an excellent way to set growth goals and break down the goal into a step-by-step monthly plan to keep you on course to the overall plan.
- Learning and understanding cash flow drivers. Most business owners have little idea about the factors which impact cash flow. They are reducing capital expenditure, increasing sales growth, improving gross profit margins or net profit margins, collecting debtors faster, turning over inventory faster and paying creditors slower. Have an expert guide you on the ratios and analysis required to measure your cash flow performances. Cash flow forecasting can also be important to better manage your cash flow.
- Make payroll, superannuation and wages tax clearing easier. Good accounting systems will make payroll simple and easy. Many businesses do not clear their PAYG wages tax properly and superannuation liability.
- Not clearing GST tax accounts on your balance sheet. Some businesses carry forward GST amounts which have not been properly allocated to their Bas return payments, therefore carrying inflated balances which are simply not right. When Bas journals are done properly the balance sheet can give you a quick idea of how much GST is owing.
Good luck on better managing your accounting in business.
Helping you better manage your accounting in business is part of the service at Tax Accounting Adelaide.
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- Sole trader, Partnership, Company and Trust Tax and BAS returns;
- Self Managed Super Funds;
- Bookkeeping and Choosing Accounting Software;
- New business Start ups Advise;
- Specialising in personal training businesses;
- Improving your business through our business blood test check up;
- We help you get leads with our own business networking events.
More than just Bookkeeping, Bas returns and Tax returns – At Tax Accounting Adelaide we use accounting to grow your business