As a business owner, you’re responsible for the outputs of several business disciplines: from marketing and HR to IT and legal, you’re expected to know a little about a lot. Accounting is no exception – in fact, it tops the list of ‘most valued business area that owners get wrong,’ (because nothing stings more than unaccounted income or missing profits). With limited time and a realistic inability to be across all disciplines at once – things can unravel pretty quickly, and before you know it – you’ve misallocated an expense, forgotten to depreciate an asset and stifled the growth of your own business. Ouch.
Truth be told, most business owners don’t have the training or background required to avoid common accounting mistakes (sorry, tough love).
Despite late nights and endless ‘making accounting easy’ tutorials, key areas get overlooked. And this costs you money.
To ensure you’re maximising profitability and enabling growth, you need a CPA professional (okay, we’ll be out with it – you need us). To assist you today, we’ve put together a list of the most common mistakes we see in the marketplace. These are all pretty simple, but believe us, they happen. Avoid these, and you’re on your way to success.
- Choosing not to use accounting software. Let’s face it – we live in a digital world that has no place for hand-written ledgers or manually created balance sheets. Think you’ve got all those important dets stored in your head? That it’s better that way because your information is impenetrable to cyber-attacks or corruption? Think again. The risk of maintaining a paper-based system is infinitely greater than maintaining an online platform. Used correctly, the right accounting software will identify your most valuable customers, produce reports that highlight the ideal balance between mark-up and customer spend and pin-point best-selling products or services. Critical to informing how and where you reinvest in the business, the right insight is an enabler to growth.
-
Not knowing how to use the software you’ve purchased. To meet changing customer needs, online accounting platforms have made accounting look and feel simple. Just click here, allocate that, find a YouTube tutorial for the rest. But all that glitters isn’t gold: whether you’re using the software the wrong way, don’t really know how to use the software or are misallocating expenses and robbing yourself of tax depreciations; you’re leaving yourself vulnerable.
- Having the wrong numbers. Whether a result of incorrect data, late-night head-scratching as a pseudo-accountant or even engagement of a novice that’s green behind the number pad – having the wrong numbers will cost you money. Don’t leave yourself open to ATO audits and poor business decisions – getting the numbers right fuels better decision-making.
-
Mixing business and pleasure. All too often, business owners co-mingle personal accounts with business accounts. We get it. Life isn’t that compartmentalised. But tax deducting your family holiday (you went on a conference, right?) doesn’t have to mean missed deductions caused by co-mingling or extra-work created by a pop-up audit from your friendly (or not so friendly) ATO. From a compliance and profit perspective, maintenance of separate bank accounts and credit cards is ideal. To minimise tax and maximise deductions, keep your private life separate.
-
Letting the payroll manage you. No one likes to feel like Uncle Scrooge at Christmas (which is how you’ll feel if you’re accused of underpaying staff). So let’s nip this one in the bud. While payroll has been made to look simple, it’s actually one of the more complex areas of running a business. Not only do you need to ensure you’re paying employees the right wage, superannuation and allowances, you need to be confident that payroll and withholding tax are being calculated correctly. An incorrect calculation of withholding tax can result in a huge bill due and payable by you to the tax department – something to be avoided at all costs.
So, there you have it. Lessons learnt from those that have fallen before you. While you may not be engaging in some (or any) of these common mistakes, rest assured that 98% of businesses can improve profitability by improving systems and insight. Just make sure the insight is built upon professional truth – not amateur fiction.
Keen to learn how you can grow your business? Get in touch with Start Grow Run today.
