When dealing with numbers, accuracy is very important especially if you are a bookkeeper. Financial reports are the lifeblood of every company. It is where business owners refer their decisions on growing their business. Before you can create a flawless business plan, getting your bookkeeping practices in place must be kept in mind. Committing too many errors on your financial report spells trouble.
Don’t pocket cash from clients
When it comes to securing a loan or seeking for investors, the profit margin plays a huge role. For small business owners, it can be tempting to pocket cash from clients considering the fact that it is your money. However, this practice can wreak havoc on your business in the long run because it undervalues your company. If the money you earn from clients is not on record, your financial report will appear to have a low profit margin and this will not qualify you for additional funds. It can also hurt your tax because when the cash is not reported, you will not be paying taxes on it and this practice is more likely to attract penalties once audit occurs. Make sure you deposit your business income into your business bank account if you want to increase your profit.
Don’t use personal bank accounts
Collecting your income in your personal bank account is not a good practice to follow because it denies you of getting a clear financial picture. How would you know if your business is making a profit if you have already mixed your business and personal bank accounts? You may not know your financial history if you have already fused two accounts into one. Knowing your financial history is a crucial step especially when ATO decides to audit your company. You can be held liable of paying additional taxes if you keep on following the practice.
Don’t ignore bank reconciliation
Make it a habit to check if your bank account is reconciled on a monthly basis. Bank reconciliation ensures that your bank account matches the amount listed in your bookkeeping software. Failing to reconcile regularly can end up overdrawing your bank account, which will result in shouldering bank fees.
Don’t underestimate the value of bookkeeping software
When tracking your financials, it is good to have bookkeeping software that will ease you into recording figures efficiently. Make sure you choose software that can give you real-time information and updates of your financial activities. Bookkeeping and accounting should be part of your routine. Avoid skimping on this valuable task because it allows you to monitor where your money is going. Tracking your expenses and income will give you peace of mind as you know you are not wasting money.