7 Dodgy Bookkeeping Practices to Avoid in Your Business
In the accounting field, it’s not unusual to come across some business practices that are dodgy or that sail a bit close to the edge!
These are not always committed by the business owner and may not always be deliberate. In some cases, they can happen due to errors or to poor internal controls.
Here are some examples of what to look out for.
- Not recording payroll correctly
An example of this might be where a shop or restaurant owner pays employees in cash directly out of the till without recording it in the payroll system. This type of practice makes it almost impossible to remit the correct payroll figures to the ATO.
While it’s not illegal to pay workers in cash, you still need to process and record it correctly. This includes providing your worker with a proper payslip, withholding the right amount of PAYG tax, and recording the entire transaction in your accounts.
- Underpaying workers
This one has featured quite a lot in the media lately! In many cases it may not be deliberate but due to serious flaws and errors in payroll processing.
If your business is found to have underpaid workers you could be liable for back-wages as well as fines – costing more than paying the correct amounts in the first place.
Definitely not worth it!
- Avoiding superannuation
Employers are obligated to pay the superannuation guarantee for their workers – see our article on paying the right super for more information.
Ignoring this can lead to some pretty hefty fines as well as back-payments and interest!
- Not having the right workers’ compensation insurance
Employers must have adequate workers’ compensation insurance cover for their employees in case of accidents or injuries at work.
The cost and level of cover is based on the business’s estimated wages cost for the following year. It’s important to declare an accurate assessment (at least as much as possible) to get the right cover.
Workers’ compensation insurance is well worth it, as it provides replacement wages and medical costs for injured workers. It is a no-fault system which means the worker does not have to prove negligence. This helps to avoid expensive lawsuits.
- Claiming personal expenses through the business
Any expense you claim through the business must be completely business-related. This means if you have some expenses that are part personal and part business, you can only claim the business portion.
So if you’ve been claiming for a few ‘long lunches’ for example, you might need to double check that it’s all legit!
- Double dipping
An example of this might be where you receive a weekly travel allowance in your wages and claim back travel costs you’ve incurred on top.
Not a good look and a bit like having your cake and eating it too!
- Lax internal controls
Having loose procedures and controls can lead to costly errors and possibly even employee fraud.
A typical example is allowing one employee to control the cash, banking, payroll and online payments.
You can help prevent errors and fraud by segregating duties, requiring dual authorisers for all payments, and by setting clearly defined job descriptions for your workers.
Call for some expert help!
If you struggle to get your accounts in order and want to make sure things are done by the book, partnering with a professional bookkeeping service can help you get there. To find out more, get in touch with our team.