Costly Accounting Mistakes Every Business Owner Should Avoid
Running a business in New Zealand comes with a range of responsibilities, and accounting is one of the most critical. Unfortunately, many business owners – especially small and medium-sized enterprises (SMEs) – make accounting mistakes that can have serious financial and legal consequences. Here are some of the most common and costly accounting mistakes that every business owner should avoid.
1. Mixing Business and Personal Finances
One of the most common errors business owners make is failing to separate business and personal transactions. Using a single bank account for both can create confusion, complicate recordkeeping, and make it difficult to claim tax deductions accurately. It also increases the risk of errors during audits. The fix? Set up dedicated business accounts and use them exclusively for your operations.
2. Poor Recordkeeping
Accurate and timely recordkeeping is essential for good financial management. Failing to maintain organised records of invoices, receipts, payroll, and expenses can lead to underreported income, missed tax credits, and problems during audits. Xero and other cloud-based accounting tools can streamline this process, but you still need discipline and consistency in maintaining your books.
3. Missing GST Deadlines
If your business earns more than $60,000 annually, you must register for Goods and Services Tax (GST). One common mistake is either not registering on time or failing to file GST returns when due. Late filings and payments can result in penalties and interest. Ensure you understand your GST obligations and meet filing deadlines — such as the upcoming 7 May due date for the taxable period ending 31 March.
4. Ignoring Provisional Tax
Many New Zealand businesses fall under the provisional tax regime, which requires tax to be paid in instalments throughout the year. Failing to budget for provisional tax can lead to cash flow issues and large lump-sum tax bills. Consider using tax pooling – an IRD-approved service that allows you to make flexible tax payments and potentially reduce interest costs if you’re late or underpaid.
5. Not Reconciling Bank Accounts Regularly
Reconciling your bank accounts helps ensure that all financial transactions are recorded correctly. If you fail to do this regularly, discrepancies can go unnoticed, leading to errors in your financial statements and tax filings. Reconciling monthly is a good habit that ensures accuracy and helps identify issues early.
6. DIY Accounting Without Expert Advice
While handling accounting in-house may seem like a cost-saving move, it can lead to expensive mistakes if you're not up to speed on tax laws and compliance. Working with a professional accountant can ensure you're making the most of available deductions, staying compliant, and avoiding unnecessary tax burdens.
Conclusion:
Avoiding these accounting mistakes can save you from unnecessary stress, penalties, and financial loss. At Tax Professionals in Epsom, Auckland, we help businesses across New Zealand stay compliant, manage their finances, and grow with confidence. Let us handle the numbers so you can focus on your business.
📞 Call us on 09 625 0035 or visit www.taxprofessionals.co.nz to book a consultation.