No 1: Trying to "Do It Yourself"

It is not uncommon to try to manage every aspect of a business by oneself, many small business owners insist upon handling the books themselves. Many people do this in an effort to save money but errors in accounting can be disastrous for the company, precious time is wasted that could be better spent running the business rather than trying to be a bookkeeper or accountant. A competent qualified bookkeeper will save you time, money and hassle, and enable you to focus on what you do best, running the business

It is essential that the books are always reconciled to the bank statements. A key aspect of bookkeeping is ensuring that the books are fully reconciled to the bank statement each month. Reconciliation is a primary control and a form of cross checking devised by bookkeepers and accountants to pick up any errors. Most people reconcile their bank account but do not reconcile their software, this can be a huge cost to your company. This keeps monetary errors from being overlooked. You if are not reconciling your software then we recommend you start now.

Failure to use a logical accounting system. A common mistake that a company makes when using "do it yourself" bookkeeping is when it uses an accounting software that is too complicated for their specific accounting requirements. Time is wasted learning complex software to undertake what might be simple tasks in a different software application.

You should always keep a backup log of all of the data that is entered into any type of bookkeeping program. The paperless offices does not exist in the real world, where audits do still exist. A computer system can go down and be very costly to your business without a backup.

Many businesses are good a keeping large invoices, however they do not always ensure they keep receipts. This can present issues, as legally you can not claim a GST expense without a valid tax invoice or tax receipt for your claim. This can also make it difficult for tracking and categorising your expenditure. File all your receipts and your expense records, however small, in a file. Sort them by date so they are easy to locate. Avoid the plastic bag accounting method or "shoebox" accounting if you can, as it will only cost you in accounting fees at the end of the year.

Even if you run a sole proprietorship, you should always have a separate bank account to track all of the transactions that have to do with the business. Failure to separate business and personal expenses is a consistent problem with many companies have, this leads to the problem of correctly classifying business and personal expenses, in turn leading to GST claiming errors. If you do this it will make the process of record keeping much cleaner and simpler, and will provide easy to track documentation of all income and expenses.

There is a great deal of confusion between classification of employees, contractors and consultants - this often resulting in PAYG, Super and employer obligation issues. If in doubt, use the ATO's contractor decision tool, available from www.ato.gov.au

No 8: Not classifying GST correctly

Another mistake is when businesses short-change themselves by not claiming valid tax deductions through either a lack of understanding of what can be deducted or incorrect use of the software. Three common GST mistakes include claiming GST credits without valid tax invoices, claiming GST credits for the full amount of purchase when goods are used partially for private purposes and claiming GST credits where the supplier is not registered for GST.

You should always reconcile your payroll liabilities as this can lead to significant penalties. Many business owners do not or do pay incorrect employee super contributions.