Bookkeeping is your secret weapon when it comes to business management and growth. Accurate and consistent measurement of a business’s financials is a key differentiator; it’s what propels you into growth and expansion.
Here are some common bookkeeping issues or mistakes you need to avoid:
- Improperly categorizing expenses
Accurate classification of income and expenses ensures proper measurement of profitability. Different tax treatments of each income and expense category can further result in significant tax savings.
- Not reconciling the books with the bank statement each month
Any experienced bookkeeper will tell you that this is the cornerstone of your financials. Without a proper reconciliation process, you will not be able to track where your money comes from and goes to.
- Not placing enough value on your time
Many business owners try to do their bookkeeping themselves or do not have the professional help they need. Handing over your books to a bookkeeper will free up more of your time so you can focus on growth and taking your business to the next level.
- No Tax Invoice
It is essential that you have a tax invoice to back up your claims on business expenses. If you do not have any proof of the transaction, you will need permission from the ATO to claim it, along with any GST associated, or possibly not be able to at all.
- GST Free Items
There are many items and services which do not attract GST; these shouldn’t be included in your activity statement as you won’t be entitled to collect a return if it was never charged in the first place.
- Company Vehicles
If your car is classified as a ‘luxury car’, it will have a limit on what proportion of the GST can be claimed. This limit does change periodically hence it must be checked before submission.
- Sale of Equipment
Sale of motor vehicles, telephone equipment and other such business assets will attract GST, much the same as any other transaction would.
- Stamp Duty
On an insurance policy, there is stamp duty that does not have any GST attached and has to be excluded from your return. The correct amount will be stipulated on the renewal form or tax invoice.
- Entertainment Expenses
A maximum of 50% of any GST incurred can be claimed in agreement with the fringe benefits tax, but to claim the entire GST amount would be incorrect and could be questioned by the ATO.
- Not saving receipts of less than $75
While such receipts may not be required by the ATO, they provide backup documentation for the many deductions you may claim. We recommend our clients to use our integrated platforms to directly save a copy of their receipts against every transaction.