5 Bookkeeping Mistakes to Avoid (and How to Make the Best Bookkeeping Choices)
An effective and streamlined bookkeeping system is crucial to your business’ success and growth. It’s important to recognise that what may have worked in the past doesn’t necessarily meet the challenges of a modern, fast-paced, sophisticated business world.
Here are 5 key bookkeeping mistakes businesses most commonly make which can – and should – be avoided.
Keeping your bookkeeping in-house
Handling your bookkeeping internally can be deeply inefficient and actually take time, expertise and focus away from what you do best.
Outsourcing your bookkeeping need not be prohibitively expensive. Many accounting and bookkeeping firms offer packages to fit your needs. For example, you may only need specific expertise in balancing your books, or you may want to offload your entire financial management with a comprehensive end-to-end bookkeeping and accounting service. You can pick and choose.
Outsourcing is cost effective and makes you ‘time-rich’, freeing you up to focus on revenue generating work.
Not taking a more sophisticated view
To make strategic business decisions, especially in light of global crises, regulation or economic volatility, it’s important your business has a sophisticated view of its finances.
So, what is a sophisticated view? It’s a transparent view of your finances through forecasting, budgeting and cash flow management. It involves working with a team of experts who have extensive financial and industry knowledge, who understand changes to regulations and compliance. It is directly linked to better financial results and revenue outcomes.
Working with several minds for less than the price of one and increasing growth as a result is a sophisticated way of working.
Not forecasting cash flow
Now more than ever it is simply too risky to not have a handle on cash flow. Even the most established business can be caught out, and insufficient cash flow can become a serious issue. Forecasting cash flow can ensure that the basics like being able to pay rent, salaries, tax and suppliers, are covered. It’s a time consuming and time-bound process, but it’s essential in modern business.
Investing in the expertise and time to forecast your cash flow ensures you will always have enough cash to operate.
Not reporting on profitability
If you aren’t reporting on profitability, then you are essentially flying blind. Detailed profitably reporting is knowing the profit margin on every product or service in your business. This can be a make-or-break factor in today’s business world. Buffering losses because you’re making enough money overall is not sustainable.
Many small business owners would like to investigate their profitability but just don’t have the time or know where to start. But the risk of putting it off is that you can’t make informed decisions about where to expand or what products to discontinue. It’s the risk of missing out on opportunities or losing money on some products and services without even realising it.
Understanding profitability, especially for every product or service is extremely important and should be a consideration in your bookkeeping.
Not using the best (of the best) accounting software
Cutting edge accounting software makes an enormous difference to every aspect of your business finances. The essentials you need to look out for include a cloud-based service with connectivity when and where you need it; intuitive and user-friendly platform; multiple app integration; and scalable, with the ability to handle all your needs as your business grows.
Cutting-edge accounting software keeps you up to pace with the fast-changing needs of modern business.
If you’re interested in finding out more about the best and most effective bookkeeping support for your business, contact us.
At Keeping Company, we’re not just accountants, we’re business people too. With our counsel, your business can reach its full potential.
For all media enquires please contact Tracy Miller, CMO, Keeping Company 0414 898 452.
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.