Good bookkeeping is the foundation of any successful small business. Accurate records not only keep you compliant with tax obligations but also provide insights that help you make better financial decisions. Unfortunately, many business owners fall into avoidable bookkeeping traps that can cause stress, missed opportunities, and even penalties from the ATO.
Here are some of the most common bookkeeping mistakes to avoid:
Failing to reconcile your bank accounts, credit cards, or loan accounts on a regular basis means errors can go unnoticed for months. This
can lead to overstated or understated profits and cash flow issues.
Tip: Reconcile accounts at least monthly to catch discrepancies early.
If your annual turnover is $75,000 or more, you must register for Goods and Services Tax (GST). Many
businesses either forget to register or make errors when reporting GST in their Business Activity Statements (BAS).
Tip: Use Xero to track GST automatically and lodge BAS statements with accuracy, reducing the risk of ATO penalties.
Under the ATO’s record-keeping requirements, Australian businesses must keep financial records for at least five
years.
Lost receipts or incomplete documentation can mean losing out on legitimate deductions.
Tip: Using Xero to store scanned copies of receipts can streamline your overall record keeping requirements.
Coding expenses incorrectly (for example, recording a capital purchase as an expense) can distort your financial reports and lead to incorrect tax outcomes. Similarly, some expenses (such as entertainment) may be subject to Fringe Benefits Tax (FBT) or have limits on deductibility. Ensuring that you apportion expenses for business and private use is also crucial.
Tip: Stay informed about ATO rules on deductible vs non-deductible expenses, by seeking regular advice from your accountant.
Late superannuation payments are a major red flag with the ATO. SInce the rollout of Single Touch Payroll (STP), compliance is more closely monitored than ever.
Tip: Use Xero's 'Auto Superannuation' function to pay super on time, and at ease, to avoid penalties.
Many small business owners see bookkeeping as just compliance, but it’s also a powerful tool for growth. Ignoring your financial reports means missing insights into profitability, cash flow, and tax planning.
Tip: Review your profit and loss statements and balance sheets monthly. This will help you make informed business decisions, and prepare for tax liabilities.
Avoiding these mistakes will not only keep you compliant with the ATO but also give you confidence in your numbers. At Sterling Business Advisory, we specialise in bookkeeping and small business accounting services for clients all over Australia.
Whether you need help with BAS, payroll, GST, or advisory support, we ensure your books are accurate, compliant, and working for your business success.
