The second in a series of Small Business Basics by Lisa Martin, Executive Director of professional bookkeeping and accounting firm, GoFi8ure.
If you’re running a business you’ll have business expenses – that’s a given. Every so often, usually two or six monthly (to coincide with your GST returns), you’ll have to reconcile these expenses from your bank account to your accounting/bookkeeping software. That’s all fine. However, it might be worth double checking that everything you claim is legitimate.
Amongst your transactions there’ll likely be a good mix of petrol and parking receipts, office stationery, advertising and entertainment (that’s the round of sandwiches you bought at lunchtime when you met with one of your clients). But sometimes, personal expenses can slip through. It could be that you combine a business trip with a visit to see friends and you don’t adjust the business vs personal proportions of your travel claim. Or, you make a personal purchase with your company credit card by mistake and, in the name of keeping things simple, you just put it through under ‘general expenses’ anyway.
You might think these examples are just minor inconsistencies and that they don’t really matter. After all we’re not talking about the claims that some people make which are obviously un-related to business (the British MP famous for claiming to have the moat around his house cleaned springs to mind). But they do matter. You might not have a moat, and you might not be so silly or greedy to put something like that through, but you don’t want to get into the habit of being blasé about what goes through your books. You want every transaction to be a legitimate one.
The best way to keep your bookkeeping squeaky clean – remembering that your industry could be the next one to be audited – is to check, check and double check when you reconcile your expenses. If you know a purchase didn’t directly benefit your business then it’s not a business expense and you can’t claim it. If you are unsure, simply ask your Bookkeeper or Accountant.