Bookkeeping feels like admin, which is why it gets done badly. It is actually the raw material for every number you and the ATO rely on, and errors in it cost money in two ways: tax you did not need to pay, and time your accountant spends unpicking it.
Here are the ones we see most.
Coding everything to one account
A profit and loss where 40 per cent of expenses sit in "General expenses" or "Sundry" tells you nothing and tells your accountant less. Worse, it hides deductions, because nobody can identify what is actually in there.
A chart of accounts should have enough categories that you can answer a question by looking at it, and few enough that coding does not require a decision. For most small businesses that is somewhere between 25 and 50 expense accounts.
Treating the bank feed as the truth
Bank feeds are a brilliant tool and a poor record. They show money moving, not what it was for. A $2,400 payment to a supplier could be stock, equipment, a prepayment, or a loan repayment, and each has a different tax treatment.
The feed also does not know about anything that did not go through the bank: barter arrangements, expenses paid personally, non cash transactions, or a customer paying a supplier on your behalf.
Reconcile against source documents, not against the feed's guess.
Not keeping the receipt
The transaction line is not substantiation. For most deductions you need evidence of what was purchased, and a bank line saying the merchant name does not establish that the purchase was for the business.
Every accounting package now takes a photo from your phone and attaches it to the transaction. It takes about eight seconds. Do it at the point of purchase, because you will not do it later.
Getting GST wrong on the common exceptions
Most transactions are straightforward. A short list is not, and the same items come up every time: bank fees, interest, government charges and most licence fees, insurance where the stamp duty component is not subject to GST, residential rent, most food items, some medical and health services, and anything purchased from a supplier who is not registered for GST.
Claiming GST on a supplier who is not registered is a common and easily detected error. If you do not have a valid tax invoice showing GST, you do not have a credit.
Recording loan repayments as expenses
Loan principal is not deductible. Interest is. A repayment that goes out as one amount has to be split, and a business that codes the whole repayment to an expense account is overstating deductions in a way that will be picked up.
The same applies to hire purchase and chattel mortgage arrangements, where the treatment depends on the structure of the agreement.
Leaving the personal and business accounts tangled
Every personal transaction that runs through a business account has to be identified and journalled out. In a company or a trust it creates loan account issues that have their own tax consequences.
One business account and one business card, used only for business, eliminates most of this. It is the highest return bookkeeping habit there is.
Doing it once a quarter
Three months of accumulated transactions is not bookkeeping, it is archaeology. You will not remember what a payment in July was for when you look at it in October, so you will guess, and the guess will be conservative in the direction that costs you a deduction.
An hour a week is faster in total than a day a quarter, and it is far more accurate.
The one that matters most
Reconcile the bank. Actually reconcile it, so that the balance in the accounting system equals the balance on the statement.
If those two numbers do not agree, every report the system produces is wrong, and nobody can tell you by how much until it is fixed.