Small business can be stressful. From cashflow to invoicing, to managing staff and sub-contractors – if you’re not careful, the small daily pressures can build up into a big headache.
Unfortunately, too many small business owners add to the pain by putting their head in the sand, when they should be taking action. Issues around finances and tax compliance don’t go away – they actually get bigger if you ignore them.
To help your business run smoothly and stress-free, take note of these ten accounting issues your business can’t afford to ignore:
1. Managing entries and reconciliation
Time is money and when you’re running a small business, sometimes there are just not enough hours in the day. Before you know it, weeks – and even months – have passed and your finances are in a mess. You have not been reconciling any bank statements and your financial reporting is not current. Before the problem gets any worse, it’s important to regain control. ATO compliance is one thing, but without up-to-date financial information, it’s virtually impossible to make sound business decisions to grow your business.
As an example, spending money your business does not have can result in reduced profits – with forgotten unpaid invoices putting a serious dent in your cashflow. There can also be problems with suppliers and contractors – and your business may get a bad credit rating that could affect future business deals.
2. Not understanding your accounting software
It’s all very exciting when you’re launching a new business. You’ve sorted your logo, your business cards and your fantastic new website – and because someone told you great things about the latest accounting software, you signed up and installed it. Now you’re operating but…without the proper training on how to make the most from your accounting software, you’re missing opportunities to streamline the way you tackle your financial record-keeping and you’re wasting lots of time.
If you’re not managing your entries efficiently, things may get missed – leading to incorrect assessments of your true financial situation. To make the best decisions for your business, you need to know how your business is running. Take the time to work on your business – and get some training to help you understand your software. Your business (and your bookkeeper and accountant) will thank you for it – and because you’ll make their job easier and less time-consuming, you’ll save money as well.
3. Not Making The Most of Your Accounting
Accounting is much more than a tool to enter your financial business data. Sure, you need to meet obligations with the Australian taxation office (ATO) but you also need to plan and grow a successful, sustainable business. Use your numbers to give you a clear indication of how your business is really going – and how you can improve it further to make more profits, and less headaches.
4. Mixing Business and Personal Finances
It’s a common mistake. But keeping a clear definition between your personal and business expenses is critical. You’ll save time and money on entering data and you’ll have a much clearer picture on the reality of your financial situation – information that you can use
5. Looking After Receipts
Yes, there are lots of apps and tech tools that make digital record-keeping of your receipts easier but paper trails still matter so keep your receipts in a safe place – in a logical order. With each new one you get, take the time to mark the back of it with the date and purpose of the expense. Good record-keeping makes tax time much easier – and it means you’ll make the most of all your claimable deductions.
6. Getting The Sums Right
Crunching numbers can be confusing and at the end of a busy day, your brain is not always at its sharpest. But even the smallest maths error can mean big mistakes when it comes to your financial record-keeping. Always take the time to double-check and use a calculator to ensure complete accuracy. If maths mistakes go undetected, the flow-on effect onto your tax records can be huge and could cost you a fortune.
7. Don’t just focus on the short-term
With the daily issues of running your business, it’s easy to focus on the short-term and completely forget about the long-term future. To get value from your accounting, you need to do more than just keep track of your numbers. Effective accounting is about forecasting future growth and figuring out how to prevent future losses. Look at issues around staff, business premises and the equipment you need to grow.
8. Hiring The Wrong Team Members
That lovely offer from your sister-in-law to help with all your bookkeeping and accounting might have come from her heart but it might not be the best thing for your business. If you hire a family member or friend who thinks they’re doing you a favour, the real costs may be over-payments of tax, penalties for late lodgment and even an audit. The only people who should be managing your finances are finance sector professionals who understand all the current laws relevant to your small business.
9. Thinking Technology Is the Magic Potion
Just because you have the money to spend on the latest technology, does not guarantee mistake-free accounting. You don’t have to spend a fortune on expensive accounting tech tools but you do need to invest time and sometimes money in learning how to use what you do have.
10. Not Letting Go
You are not a superhero. And you don’t have to be. It’s okay.
Recognise your own unique skills and how they help your business. And the stuff you’re not the best at? Find someone who’s better? Yes it’s an investment – but it’s an investment in growing your business to make more profits.
Let go of the idea that you must do everything. Great business owners know when to let go…
For advice on how to make the most from your accounting, speak to our team at TAS today on (03) 9728 1448