Cloud accounting software simplifies bookkeeping and enables many business owners to look after their own books. There are still traps for the unwary and being aware of them and how to avoid them will save you a great deal of time and even save you from paying unnecessary GST.
The potentially most costly mistake – and I see it frequently – is the incorrect recording of payments on invoices and subsequently failing to match the payment to the correct bank transaction.
Following these three simple steps when an invoice is paid will help ensure that you correctly record all of your payments:
1. The amount paid – this must match the amount that was paid into your bank account to the cent, not rounded
2. The date of payment – this ensures your software finds the correct bank transaction to match to
3. Select the right bank account – selecting another account, an asset or a clearing account will prevent your software from finding the match
What happens when it goes wrong? In the worst case scenario the payment is applied to the invoice (incurring the GST payable liability) and the unmatched bank transaction is also recorded as a sale (with another GST payable liability). This effectively doubles the GST you will owe on your BAS when you prepare your GST report from the accounting software.
How to check if you have been doing it correctly? Performing a bank reconciliation is the quickest and easiest way to check if your books are correct. All accounting software will provide a method for doing this. It also ensures that your software’s bank feeds have not missed any expense transactions that you should claim – this happens regularly with some of the most well known accounting software brands.
Quickbooks makes the invoicing process easy with this helpful Invoicing Guide
Interested in moving to Quickbooks? The Bookkeeper Guy has QB Plus files available for a low monthly price of $27.50 for life!