Common Bookkeeping Mistakes
- Not reconciling bank accounts and credit card account could result in missed and/or duplicated income and expenses. Also when banks are not reconciled in a timely manner, people often forget what transactions were for if they have to try and remember a transaction that happened 6 months ago, particularly if there are a lot of transactions.
- Incorrectly recording money in or out as a “Spend money” or “Receive money” when in fact an actual invoice or bill has been recorded in Xero. The funds received need to be applied to the invoices raised; if it is recorded as a spend/receive money, it will result in duplicated income or expense.
- Not occasionally checking bank/credit card balances in Xero to what’s actually in the bank account. Even if bank feeds have been set up, it is still possible to make mistakes in Xero and have your bank account not be correct in Xero.
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Other coding mistakes include:
- Coding to the wrong account
- Not coding personal expenses to drawings or director loan account
- Recording the GST incorrectly
- Recording entertainment with GST
- Coding asset purchases to the profit and loss instead of balance sheet
- For businesses who have contractors or subcontractors, not correctly recording these transactions so that they appear correctly on the annual TPAR report. The contractor should be correctly set up as a contact including name, address, ABN, GST registered or not. The ABN lookup tool should be used to check whether a business is registered for GST or not and/or if the ABN is valid.
- Where a client has multiple entities and transfers between these entities, the inter-company loan accounts need to be reconciled on a regular basis. Transactions can easily be missed where they are recorded in one entity but not coded in the other entity.
- Not recording the wage payments to the correct account. For example in Xero when wages are recorded they go to the #804 wages payable account on the balance sheet. So when the wages are paid out of the bank account, they need to be coded to #804 wages payable account (and not to the wages expense account on the profit and loss).