Common Accounting Mistakes Tradies Make

Accounting mistakes are common among small business owners, particularly tradies, who can become overwhelmed with the complexity of the financial side of their business. A financial review by a professional accounting firm can often help tradies identify and fix these common accounting mistakes before it’s too late. 

In this blog post, we will discuss the most common accounting errors tradies make and how to fix them.

Inadequate Record Keeping

One of the most common accounting mistakes tradies make is failing to keep accurate and up-to-date records. This can be disastrous as inadequate records can prevent a small business from being able to track expenses, recognise income, and accurately compile financial reports. 

The Australian Tax Office (ATO) requires all registered businesses, including tradies, to keep records for a minimum of five years. These records must include details of all income and expenses and must be in a recognised form, such as receipts, invoices, and bank statements. 

Every tradie should have a record-keeping system in place and make sure it is updated regularly. This will enable them to easily compile financial reports when needed. An easy way to do this is to use online accounting software such as MYOB or Xero, which makes it easier for tradies to record and track finances without the help of an accountant.

Mismanagement of GST

The Goods and Services Tax (GST) is an important part of running a business, and it’s important to be aware of the GST rules. A common mistake made by tradies is not correctly applying the 10% GST when invoicing customers or not correctly reporting GST on returns to the ATO. 

Invoices should include the correct amount of GST on all items and services, and a breakdown of the GST should also be included. Tradies must also be aware that GST is only applicable to goods and services sold within Australia and not to international customers. 

When completing GST returns, tradies should ensure they include all income and expenses to ensure the correct amount of GST is paid. They should also double-check the amount of GST claimed to avoid any unnecessary penalties from the ATO.

Non-compliance with Superannuation Requirements

Superannuation is an important part of retirement planning and is often overlooked by small business owners. It is a legal requirement for employers to make the required superannuation payments for their employees. 

A common accounting mistake related to superannuation is not making the required payments. Not only can this result in penalties from the ATO, but it can also be detrimental to your employees’ retirement savings. 

To ensure compliance, tradies should keep accurate records of superannuation payments and be aware of the deadlines to make payments to avoid penalties. It’s also important for tradies to stay on top of any changes to superannuation laws to ensure they are compliant.

Inaccurate Payroll

Accurately calculating employees’ wages and tax payments is an important part of running a business. However, it is a complicated area and a common accounting mistake tradies make is miscalculating employee salaries or incorrectly calculating tax deductions. 

Tradies should ensure the correct wages and allowances are paid to employees based on the Award or Enterprise Agreement they are covered by, and any additional payments are correctly taxed. To ensure accuracy, tradies should use payroll software, such as MYOB Payroll or Xero, to automatically calculate wages and tax deductions to avoid any potential errors. 

Tradies should review their accounting practices regularly to ensure they are compliant with tax laws and to identify any potential mistakes. At Griffiths Advisory, we are experienced in working with tradies and can help them identify and fix any common accounting mistakes they may be making. Contact us today for a consultation.

Related posts:

• Essential ABN Information for Tradies Starting Their Own Business
• How to Grow a Tradie Business
• Tax Deductions for Tradies