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If you are like most business owners you probably think that a good bookkeeper never makes mistakes right?  Wrong!  What's the probability that you'd make a mistake if you were entering a thousand figures each with dates and a description - pretty high right? 

A little while ago, just for fun I decided to sit down and write a list of all the mistakes that I've ever seen in bookkeeping.  2 hours, 8 pages and 460 items later ..  Since then I have thought of a whole load more and I'm sure if I gave the list to my team of bookkeepers they'd double it.

So, the issue is not that mistakes are made .. that is a given .. the trick is doing sufficient checking to make sure mistakes are picked up before they become problematic.

So what are the most common mistakes and what checks can be done?

[1] MISTYPING AMOUNTS or DATES / APPLYING TRANSACTION's to the wrong account

It is very easy to mis-type an amount or a date.  It is also very easy to apply a transaction to the wrong account or accounts.  What is the best way to check for this kind of error?  Answer: Reconciliations

Most of you will have heard of the Bank Reconciliation which is a check of entries in your accounting system against entries listed in your bank statements.  Some of you will know what a bank reconcilliation is, a few of you may even be able to do one and some of you will even be able to fix one if it gets broken.  In fact broken bank "Recs" are one of the biggest pains for bookkeepers and they can get broken for any number of reasons.

Reconciliations do not need to stop with the bank.  You can reconcile other accounts as well such as accounts payable and accounts receivable to check that you have not been over or under-paid and that you have not under or over-paid anyone.

Some words of warning though.  Do not expect the dates of the transactions to match your bank-statements perfectly - they won't.  Why?  A number of reasons, the primary reason being that the statement date could be either the date the transaction occurred or the date the transaction was processed by the bank - these two dates may or may not be the same.

[2] INCORRECT CORRECTIONS !

This is a huge area in bookkeeping and we could not hope to cover all the possibilities here.  Suffice to say that it is one of the most problematic areas especially for business owners as well as for the less-experienced bookkeepers.  It is vital to consider the impact of any ammendment.  In Australia businesses must submit a BAS (Business Activity Statement) once a quarter to report their GST (Goods and Services Tax).  It is vital to understand whether the correction you are proposing will impact a BAS (especially a BAS that has already been submitted).  Also what about the Bank and other reconciliations that have been done for the period in question.

[3] WRONG USE of ACCOUNTING SOFTWARE APPLICATION

This kind of error usually occurs because the bookkeeper does not undestand how the software is supposed to be used.  The simple answer is effective training coupled with regular attendence at seminars run by the software vendors where they will otften highlight some of the more common areas that people tend to get wrong.

The most common impact of such mistakes is that one or more reports generated by the application will be incorrect.  Finding such mistakes is often quite difficult.

Well that's all for now ..

I've made a commitment to write on a new one of the 460 items each week or so.  You can follow my posts on Facebook.  Look for the group entitled "IQ4 Bookkeeping Services Melbourne Australia"

Meanwhile if any of you have any thoughts or comments I'd love to hear from you.

(c) 2010 Graham Gunn, Director IQ4 (Bookkeeping) Pty Ltd