It might be tempting to do your own bookkeeping in Geelong. You might think it is going to save you money and help you streamline your business processes. However, the truth is DIY bookkeeping can lead to costly errors.

Here are five of the most common mistakes business owners make when attempting to manage their own books.

Mixing Personal and Business Finances

When you run your own business, especially if it is a sole proprietorship, it is common to make the mistake of conflating personal and business accounts.

In many cases, business owners will use the same bank account and the same credit card for both business and personal expenses, which makes it hard to track business finances accurately.

When this happens, missed deductions, overreporting of income, and underestimating of expenses are just a few of the things that can lead to potentially serious compliance issues and financial repercussions. To maintain clarity and compliance, it is crucial to keep personal and business finances separate.

Neglecting Reconciliation

Regularly reconciling your accounts is a critical aspect of bookkeeping. Many business owners who try to do their own bookkeeping fail to do this properly, as it involves a detailed comparison of business financial records against their own records to ensure they match up.

Doing a regular reconciliation can help you eliminate errors such as duplicate transactions, missed payments, or even bank errors. This helps to prevent inaccurate financial reporting, save you money, and empower smarter decision-making.

Misclassifying Expenses

Incorrectly categorising your expenses puts you at risk of distorting your financial reports and your tax filings. For example, classifying personal expenses as business expenses or vice versa can actually lead to legal consequences, with the taxman coming after you for fraud.

It can also lead to inaccurate financial insights and compromise your decisions. For these reasons, it is crucial to establish clear expense categories and apply them consistently so your financial reporting remains accurate and compliant.

Ignoring Documentation

A common mistake DIY bookkeepers make is failing to keep track of proper documentation, which can cause significant problems when undergoing an audit or having to resolve discrepancies.

It is common for business owners to lose receipts, invoices, and other supporting financial documents. When this happens, it can become very difficult to verify transactions or justify deductions, leading to potentially massive auditing issues.

A qualified bookkeeper will implement an airtight system for organising and storing financial documents to ensure accurate records are maintained.

Failing to Plan for Taxes

Overlooking tax obligations or failing to plan adequately for tax liabilities is serious. When tax liabilities are not properly factored into your business plan, it can result in unexpected bills, penalties, and other charges that can throw you off course significantly.

As a business owner, it is crucial to set aside funds for expected taxes and ensure you are informed about the relevant tax laws and deadlines. Having a bookkeeper on your team can help you optimise your tax planning strategies and secure the financial health of your business.

Contact us for bookkeeping in Geelong and avoid unnecessary financial risks! Infuse Advisors & Accountants will ensure your books are up-to-date and professionally managed, taking away the stress and letting you focus on running your business.