Common Bookkeeping Mistakes : Lessons from 35 Years of Auditing

Bookkeeping might seem straightforward, but my 35 years of auditing in Malaysia have shown otherwise.
In Johor Bahru, the quality of accounting done by in-house personnel or outsourced third parties has been on a worrying decline, aggravated by the difficulty in recruiting skilled accounting staff.

Here are some common mistakes :

Missing invoice

A manufacturing company hired an outsourced bookkeeping service. During an audit, we found many expenses recorded without invoice.

Lesson : Maintain proper documentation for every expense to ensure accuracy and protect against discrepancies.

Mismatched ledgers

A retail business’s in-house bookkeeping staff lacked training, leading to significant discrepancies between ledgers and bank statements.

Lesson : Regular reconciliation and proper training in bookkeeping principles are essential.

Phantom assets

A service company had high-value assets recorded in their books that were long disposed of, causing inaccurate financial statements.

Lesson : Keep accurate records and regularly review asset registers to avoid compliance issues.

Disappearing cash flow

A logistics company failed to track cash flow accurately, resulting in liquidity issues despite high sales.

Lesson : Monitor cash flow closely and follow up on receivables to maintain financial health.

Additional Common Mistakes

1. Inaccurate data entry : wrong amounts or accounts lead to inaccuracies.
2. Mixing personal and business expenses : complicates bookkeeping and tax issues.
3. Delayed recording of transactions : causes inaccurate financial reporting.
4. Inconsistent categorization : leads to misleading reports.
5. Not backing up data : risks data loss.
6. Non-compliance with regulations : can lead to legal penalties.
7. Overlooking small transactions : adds up to significant inaccuracies.
8. Improper payroll management : causes payroll errors.
9. Neglecting to update software : misses critical updates and security features.
10. Not reviewing financial statements : fails to monitor financial health.
11. Lack of common sense : avoid basic mistakes with practical understanding.

The decline in bookkeeping quality is particularly concerning in Johor Bahru. As businesses face increasing challenges in recruiting skilled accounting personnel, the impact of these common mistakes becomes more pronounced.

PS : Authored by Mr Koh Teck Peng, the Group Principal, in his personal LinkedIn post https://bit.ly/4c642ik

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