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What are common bookkeeping challenges faced by a small business?

How has operating your small business been like for you? During the initial phase, you start small, look for steady ground, and then grow your business further. The initial stage also referred to as the development phase, comes with a lot of lessons to learn from. This is the time when you are going to deal with the most challenges.

Also, this is the appropriate time for you to get hold of your bookkeeping skills in order to manage your finances correctly.

Bookkeeping might appear to be hard at first; however, keep in mind that it is taken care of properly; it would help in contributing a lot towards the overall health of your small business. Thus, as a small business owner, you must make sure that you spend some time every week on this chore. 

Listed below are a few common bookkeeping challenges faced by small businesses:



One of the biggest bookkeeping challenges for NFPs is not being aware of the tax liabilities and government rules which can lead to losses. Many tax concessions are applicable to non-profits operating in the country, and they depend on the legal structure of the organisation. You need to be watchful of tax reforms and updates occurring in the state regulations to avail the concessions.

Your NFP can save a lot of money by leveraging these concessions that can make an impact on your capital flow. The concessions are applicable on income tax, goods and services tax, capital gains tax, fringe benefits tax, etc. You must review the entitlements available to your organisation to take advantage of these privileges.



Poor cash flow is a nagging issue with many non-profit organisations and can disrupt the functioning of the entity. A bookkeeper can help in this regard through cash flow forecasts and management of the debts in a smart way. They take the pains to make arrangements for activities which can be used for generation of funds.

They ensure that the focus is on employees who help enhance cash flow and replace the non-productive activities with the productive ones. They can aid in creating more liquid assets through the selling of redundant assets to maintain positive cash flow. The bookkeepers are adept in drafting reports which can be presented to the board of directors when required.



What process do you follow from generating invoices through to collecting the payments? This process can be quite complex, and so often leads to further problems. Having invoices created and sent regularly, and preferably when the goods or services are provided will ensure that everything is recorded and will enable cash flow comes in regularly.

As well, you need a process to follow up outstanding invoices regularly. Too many businesses do not do this and find themselves in financial difficulty as a result. Better still, implement an automated process that will send out email reminders automatically, and you will find most customers will pay fairly quickly, leaving you to call only those who still don’t respond. It will save you hours each month.

By doing this, funds will be there for you to pay your expenses, meet your business financial obligations and to help grow your business.



Many small business owners, especially when they’re first starting out, find themselves using personal finances for business purchases, just to get things moving along. Sometimes, they may also use their business’s funds to pay for personal items. Even though you’re the owner of the business and the money is technically yours to use, combining personal and business funds are not advisable. First of all, it makes your bookkeeping extra difficult as every transaction has to be sorted out and verified before it can be entered. Secondly, it’s far easier to lose track of your actual business expenses, meaning you can miss out on valuable tax advantages. To avoid these issues, use a dedicated business bank account and credit cards. If you need personal funds, pay yourself from the business and deposit into your own personal account.



In a small business venture, it is usually believed that it is alright to generate financial reports on a quarterly or perhaps a bi-annual schedule. Nevertheless, monthly financial statements help in demonstrating to investors that you are meticulously keeping track of your business earnings and spending.

Suppose you do not generate financial reports monthly. In that case, the chances are that you may have a negative account balance just because you took care of expenses blindly and forgetting to update your income statement. Invoices to be paid by the business might get overlooked, and it could result in the negative credibility of your business. It may terminate your contracts with the vendors. Business growth may also impede or perhaps considerably drop.

When is the last time you reconciled your bank statement and company books? If you aren’t reconciling on a monthly basis, you’re simply not keeping up. While it sounds like a time-consuming and tedious task that you’d rather not do, it is vitally important and actually quite simple. All it entails is matching the transactions to ensure everything has been input properly and that the balances are the same. Not only will this give you a clear picture of your current financial situation, but it will also help you avoid costly overdrafts, bounced checks and other unpleasant surprises. Remember that the longer you wait to reconcile, the longer it will take, and it will also be more complicated. The best approach is to immediately work on the reconciliation when your bank statement arrives so that you can catch any discrepancies before they become bigger problems.



Expenditure is inevitable in every non-profit as a lot of people have to be paid for their services such as employees, suppliers, event managers, etc. It can become a pressing issue if the management is not able to curb the overspending.

A bookkeeper can salvage the situation by examining each transaction and cutting down on the underperforming activities. They can review the resources and check for wastage in time to take corrective actions. Simple changes in daily operations can save costs such as judicious use of energy, stationery, paper, etc.



Every non-profit receives grants from a variety of sources which allows it to make profits that are used for achieving the purpose of the organisation. This cash is utilised to start new projects, improve the infrastructure, and keep some in reserve for future use.

However, tracking the collection of money from multiple sources can become tedious for a volunteer who doesn’t have access to technology. A professional bookkeeping company for non-profits has the knowledge and tools (accounting software) to manage the flow of grants to avoid losing out on any essential funds.



Although non-profits are considered reliable organisations, they are not free from frauds which can take place at many levels. Since the fund providers have a lot of confidence in non-profits, the grants can get mismanaged by volunteers. Too much dependence on the goodwill of the employees can prove bad for the financial health of the organisation.

The charities need to follow the governance standard for accountability to members which keep everything in check. Thus the stakeholders should not put blind faith in the volunteers and employ a bookkeeper to keep track of the incomings and outgoings on a regular basis.



When a non-profit recruits a staff, they are obligated to pay wages to them. The charities and not-for-profits either manage the payroll themselves or hire a third party to do the same. However, professional bookkeepers can take care of this task, along with finance management with the help of payroll management software. So one person can manage all the money related processes without making any errors.

Handling payroll is a complicated process, and in case you happen to make mistakes, there are chances of getting penalised by the government authorities. Payroll management isn’t just related to the wages, but it additionally involves tax liabilities, superannuation, incentives, benefits, as well as other aspects.


Acquiring funds is a big challenge for non-profits which can come from myriad sources such as government grants, donations, debt, etc. The bookkeeper can help by providing all the required financial information and projections to potential donors and banks for seeking finance.

They will advise you if a loan is possible and how much you should borrow. They can provide inputs for preparing an application for government grants and inform you about the weak links in your application if it gets rejected by the government agency.

backpacker tax


Every time you buy anything, the clerk hands you that little piece of paper that details how much you’ve spent. In your personal life, you undoubtedly toss out those receipts immediately after you’ve made a purchase. Most times, they’re unnecessary and just take up space anyway. That kind of thinking doesn’t work well for businesses; it is a major problem. Every purchase that you make for your business, from ink pens to office furniture must be documented, and those receipts make that possible. Make a habit of collecting every receipt for the day, week, and month in a convenient location. Be sure to document what the purchase was for and how you paid. Not only will this give you an accurate view of your expenses, but it will also help to justify expenses on your taxes.



Keeping track of receipts and maintaining them methodically is amongst the significant challenges faced by small business owners nowadays. To overcome this problem, ensure that you organise all the paperwork in a proper manner and keep them someplace safe since a lot of accounting aspects depend on accurate management of expenses.

Quality accounting software can prove to be useful in this endeavour. With regards to the storage, you can save all the documents offline; however, maintaining the data in the cloud is a far better way as a result of easy accessibility, and increased security and safety. Take a picture or scan the paper receipt or invoice and upload it to the account in your ledger or store on a cloud platform. There are a lot of cloud-based accounting software programs available in marketing nowadays, such as QuickBooks, Xero etc. They can help you keep your financial paperwork safe and accessible at all times.

Tracking receipts and storing them properly is one of the biggest problems that you may face as a business owner. Make sure you compile them in an organised way and store them somewhere safe as many accounting aspects rely on tracking expenses accurately.

Good accounting software can help you with this task. As far as storage is concerned, you can do it offline but doing it over the cloud is more preferable because of easy access and greater security. Take a photo or scan any paper invoices or receipts received and upload them to the transaction in your accounting ledger or save on a cloud storage facility like Google Drive or Dropbox.



Risks are involved with the functioning of all types of entities and can shake the foundations of a non-profit. The risks can range from dependence on a small group of donors and not organising enough fundraising activities to offering credit in trading activities.

Risk management can reduce the probability of losses due to unethical practices, fraud, etc. For this, the non-profit needs to put down a code of conduct and inform it to the employees while training them. During recruitment, the management must screen the volunteers thoroughly and hire only those who share the same values and ideas.



Ideally, you should close your accounts every month so that important figures and financial metrics can be obtained. By delaying this, you won’t be able to report timely information, gain useful insights and make effective decisions. You also run the risk of recording transactions in a prior period where you have already reported externally, particularly to government agencies. Closing your accounts every single month will avert this. Sounds complex? Then seek the advice of a professional accountant.

Preferably, you must close your bank accounts on a monthly basis to ensure that crucial figures, along with financial metrics, are available easily. By postponing this step, you won’t be in a position to get timely information, obtain helpful insights or make valuable business decisions. You furthermore may be at the risk of documenting the transactions in a prior period wherein you already have recorded externally, especially to government authorities. Closing your bank accounts every month is going to help prevent this.



Accounting software is just a tool to make your work easy. However, you still need to make decisions, and they should only be taken after thoroughly reading the reports and understanding the financial data. Data interpretation is done by making the comparison of financial reports with the income statements as well as balance sheets. This often is complicated and confusing, thus using the services of a bookkeeping services provider could be an ideal solution.

Small business owners should consider focusing on the long-term outcomes of their financial decisions upon obtaining the complete knowledge of their business accounting data. Taking short-run decisions after analysis of financial records will not present your business any long-run benefits.

Cash Flow



Ultimately, your goal is to grow your business, and that means spending a great deal of time and energy on it. You put in long hours, rarely take any time off, and generally obsess over every small detail. While there’s nothing inherently bad about that, if you’re not focusing on the right things, you will actually stall your business’s growth. If you’re focused on bookkeeping, for example, you’re likely not spending time working on ways to expand. If your business is growing, the bookkeeping tasks become more complex, taking up even more of your precious time. Rather than spending your time in the back office pouring over receipts, doing data entry, trying to keep everything straight, consider hiring a bookkeeper sooner rather than later.

If anyone can successfully manage the sale of public accounting practice as part of a retirement transition plan, it should be an accountant. Excellent financial and business knowledge. Invaluable negotiating experience. Strong people skills.


However, while accountants are typically very good at advising their own clients, research from Bentley’s The Voice of Australian Business Survey suggests accounting firms are among 43 per cent of small businesses that currently lack an adequate succession plan. 

Selling a public practice has become more complex in the past decade, and good planning and ensuring you consider all options will have a significant impact on the eventual outcome.

In its succession planning toolkit to help accountants prepare for a possible sale, CPA Australia stresses the importance of presenting a firm as an attractive investment opportunity and outlining its practice profile. 

This should include its history, team structure, vision and competitive advantages; details of all services and products being provided to clients and if there are referral sources to the firm; an analysis of the firm’s client base; a rundown on its marketing plans; and an overview of its human resources and technology strengths.

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