The difference between the records in your business books and the records present in your bank statement is called a bookkeeping discrepancy. These mistakes can significantly affect GST claims, BAS lodgments, payroll reporting through STP, and year-end financial accuracy.
You need to identify these issues early so you can fix them before they turn into big issues. In this guide, we’ll discuss potential bookkeeping discrepancies and ways to troubleshoot them.
List of different types of bookkeeping discrepancies
Bookkeeping discrepancies include differences in bank reconciliation statements, transaction mistakes, payroll mistakes, timing differences, and tax reporting mistakes. Spotting these mistakes can help you maintain accurate financial records and avoid reporting mistakes.
- Financial transaction mistakes: They may include redundant data, wrong record of amounts, or missing records in daily bookkeeping.
- Bank reconciliation differences: Not matching data between bank statements and accounting records.
- Invoice errors: They may include redundant data, unpaid invoices, or incorrectly recorded invoices.
- Payroll mistakes: They may include incorrect wages, deductions, or tax withholdings.
- Tax reporting issues: These include PAYG, BAS, GST, or sales tax entries recorded in the wrong manner.
- Timing differences: These may include receipts or payments recorded in the wrong accounting period.
What are the reasons for bookkeeping discrepancies?
The primary reasons behind bookkeeping discrepancies are incorrect coding, gaps, or missed automated tasks. When payroll reporting and GST reporting tasks are done incorrectly, they can make these mistakes more serious because they can directly affect STP and BAS records. Here are the most common reasons behind bookkeeping discrepancies:
- Wrong GST coding: A purchase may be counted as GST-inclusive when it must be input-taxed, GST-free, or outside the GST system. This can significantly affect the GST collected or GST paid figures on your BAS.
- Mismatched bank transactions: Bank feeds are helpful, but they still need to be matched accurately. If a payment is added as a new financial transaction instead of being matched to the current bill or invoice, balances can become wrong.
- Redundant bills or invoices: A supplier invoice may be entered from an email and from a PDF upload. This changes and inflates accounts payable and expenses.
- Timing differences: A client may pay on 30 June, but the payment may appear in the bank feed on 1 July. If not handled properly, it can affect year-end reporting.
- Payroll mapping mistakes: STP mistakes can happen when superannuation, allowances, PAYG withholding, or employee categories are mapped in the wrong way in payroll software.
- Manual journal errors: Journals posted to resolve earlier mistakes can create new mistakes if they are not supported by clear documents.
- Software migration problems: When switching from spreadsheets to bookkeeping software such as MYOB, XERO, or QuickBooks, opening balances may not match the previous year’s final accounts.
How to spot mistakes in business books?
Follow the steps given below to spot mistakes in business books:
- Reconcile bank accounts
You need to compare the records in the bank statement against the records in your business books. When using bookkeeping software, you need to check the bank reconciliation summary, missed transaction reconciliation, and any transactions that were changed after a previous reconciliation. With this, you can identify issues that sit in missing entries, duplicate financial transactions, and changes made after reconciliation.
- Review BAS and GST reports
If your GST control accounts don’t match your BAS report, you need to check GST coding by transaction type. You need to check for purchases coded with GST where no GST applies, personal expenses claimed through the business, overseas transactions coded incorrectly, or sales assigned to the wrong GST category.
- Match payroll reports with STP records
Check whether payroll reports match what has been submitted through STP. If they don’t match, you need to compare PAYG withholding, gross wages, superannuation, and allowances. STP mismatches generally show up when payroll categories are not mapped correctly or when a pay run is changed after submission without an update event.
How to fix discrepancies in business books?
- Reconcile bank statements to find discrepancies. If you find errors in your business books, you can resolve them by removing duplicate data and adding missing data.
- Fix BAS and GST discrepancies. If BAS has already been filed, check whether the mistakes can be corrected in a later BAS or whether the earlier BAS must be revised.
- Reverse redundant bills, enter missing credit notes, and allocate payments correctly.
Conclusion
If you run a business, make sure you have a professional bookkeeper or reliable bookkeeping services in place, so you can avoid bookkeeping discrepancies.