Do you keep your business books up to date? If not, it could lead to various financial issues in your business. Late or delayed bookkeeping can make your business more risky. It can affect financial stability, resulting in missed opportunities and costly mistakes. Small businesses find it difficult to organise their business records at the last minute when they see unorganised records or unreconciled transactions.
It happens because business owners are busy running their businesses. They primarily focus on serving customers, attaining operational efficiency, and managing their team, which will result in delayed bookkeeping.
Late bookkeeping is one of the main issues for small to medium-sized businesses in Australia. That’s one of the main reasons why it’s suggested to seek help from a bookkeeper in Melbourne who can manage your financial records daily.
In this guide, we’ll discuss how delayed bookkeeping can affect your profitability and BAS compliance, and what you can do right now to fix this issue. Make sure you keep your business books up to date and track your company’s financial performance.
Struggling with late or delayed bookkeeping?
Late bookkeeping happens when a company’s financial records are not up to date for more than 30 days. This makes them unreliable for compliance, reporting, and financial decision-making. If it is not updated for more than three months, the ATO considers the information to be late or delayed. Even if you file a BAS quarterly, your financial records are likely to accumulate daily, which should be reviewed every month for assessment purposes.
Late bookkeeping usually occurs due to unexpected business growth and other seasonal conditions. Whatever the reason, it can directly impact your cash flow, BAS, and tax return in the long run.
How does late or delayed bookkeeping affect the BAS lodgment?
If you don’t update books on time, it can lead to the following BAS statement issues:
- Missed BAS deadlines
ATO penalty can be incurred if you don’t file your BAS statement on time. The penalty is incurred for every 28 days of delay. Currently, it starts at $330 for small businesses. However, this can increase based on the business size and the length of the delay. Late bookkeeping can also impact your compliance history and may even result in debt collection action.
- Discrepancies in BAS reporting
It becomes difficult to report accurate GST due to late or delayed bookkeeping. When financial records are outdated, business owners estimate figures, which can lead to inaccurate reporting, causing costly errors and ATO penalties. While over-reporting can cause unnecessary tax payments, and under-reporting may incur interest on outstanding amounts, audits, and penalties. Due to inconsistent or incomplete financial data, the ATO may delay processing your BAS, especially when anticipating a refund.
- Unclaimed GST credits
When your business expenses are not recorded accurately or when receipts are misplaced, you won’t be able to claim eligible deductions. This usually happens when business expenses are not lodged in your system, or receipts are not uploaded on time. Over a few months, this can accumulate into substantial amounts, resulting in financial losses. Due to late or delayed bookkeeping, you may face timing issues that lead to your GST credits being claimed outside the appropriate reporting period.
Cash flow problems due to delayed bookkeeping
Delayed or late bookkeeping can result in cash flow discrepancies, such as:
- Lack of visibility: When your financial records are not updated, it becomes difficult to have clarity on your expenses, income, and overall financial performance. Without current data, you can’t predict future expenses, outstanding invoices and liabilities.
- Unexpected tax liabilities: When you don’t have visibility over your business profits, it becomes difficult to allocate the accurate GST or income tax amounts. As a result, you may end up with a huge bill, resulting in financial setbacks, especially if you have a small business.
That’s one of the reasons why businesses hire professional bookkeepers. They can manage financial transactions of your company for accurate reporting and decision-making.
Effect of late bookkeeping on the tax return
- Last-minute tax rush
What if you have to process months of financial transactions at the last moment just before the tax deadline? This can lead to serious blunders, missing documentation, and inconsistent expense recording. You may also overlook potential business expenses because of rushed bookkeeping. This can increase your taxable income, resulting in higher tax bills.
- Penalty or interest charges
The ATO will impose penalties and charge interest due to inaccurate financial reports or late bookkeeping. So, make sure to record financial transactions accurately so your tax accountant Melbourne can lodge the tax return on time to avoid tax penalties.
Conclusion
In a nutshell, it’s essential to keep your business books organised to avoid last-minute tax rush, penalties, and unexpected tax liabilities, and other challenges. To ensure on-time and organised business books, you can choose our reliable bookkeeping services.