More people than ever have decided to start their own business across Australia, and if you are one of these people, you may be looking forward to the challenge ahead. You're quite sure that your product or service will sell well in the marketplace and that you can reach your prospects as often as you need to, but you do need to make sure that you pay attention to the "smaller" details of your new operation as well. In particular, do not overlook that bookkeeping chore because if you do, it could come back to haunt you in the future. What are some of the biggest mistakes that many people in your position make?
Taking a Deep Breath
If you don't consider yourself to be a detail-oriented person, then you may not be looking forward to this job. You may be tempted to take shortcuts or to do the bare minimum work, but the more attention you give this now, the better off you will be.
For example, do not be tempted to record all your expenditures under one category and then simply add it up as one big tax deduction. Unfortunately, there are some very specific rules that govern certain types of expenditures, and you may find yourself deducting things you shouldn't.
Claiming Too Much
Furthermore, you will need to separate all your personal and business expenditures into, ideally, independent bank accounts. Just imagine how difficult it may be six months from now if you have to look back at your bank statement and wonder whether that particular item was, in fact, business-related or not.
Paying Too Much
While there is a danger that you may try and claim back too much, you should also avoid the opposite. While the tax code does allow you to claim certain types of expenditures, if you simply pay for them out of your pocket and don't keep proper records, you may forget. In that case, you may end up paying tax on this amount and giving your hard-earned money to the ATO without cause. You will want to avoid this type of behaviour as well, of course.
If you're selling products or services, you may be liable to collect goods and sales tax (GST). This may make you an unpaid tax collector, but be that as it may, the ATO will take a very dim view if you make mistakes here.
Some people handle all their bookkeeping in a simple spreadsheet, and while this may be sufficient if it is properly detailed and well put together, be careful with your storage. Is this data backed up on a regular basis? If not, a computer failure could take all of your information with it and make it very difficult for you to replicate it.
It can certainly be tempting to keep costs low when you are starting off a new business, but in this case, money paid will be well spent. Outsource all of your bookkeeping to a specialist and you'll be able to sleep more soundly at night.
For more information on bookkeeping, contact an accountant.