Having organized bookkeeping is cornerstone to running a successful business. Up to date and accurate information allows business owners to make informed business decisions Below are some of the most common mistakes businesses make when it comes to their accounting and simple ways to avoid them.
1. Lack of organization
With bookkeeping you must record every transaction, store or digitize receipts, along with calculating taxes and more. If this is not being done properly by yourself or a bookkeeper, you could miss important transactions or receipts that could cost you down the road. Not being organized can affect your ability to know what is exactly going on with your business each month and it also limits your ability to rectify any problems that could arise. You need to make a conscious effort to keep track of all your transactions throughout the month by creating a system that users can follow consistently.
2. Failing to reconcile accounts regularly
With accounting you need to ensure your bank account and other important accounts are continually being reconciled for transactions. If you have a lot of transactions that go through certain accounts that you are not properly reconciling for it can cause a lot of headaches and time down the road to fix them and get it organized for tax time. Regularly reviewing your accounts and reconciling can help catch errors and potentially fraudulent transactions that have occurred.
3. Mixing personal & business expenses
Not properly breaking out your personal and business expenses leads you deducting expenses that you should not be, which could open you up to potential CRA audits. Additionally, reconciling between business and personal expenses is time consuming and can be easily avoided by having separate bank accounts and business credit cards.
4. Missing important deadlines
By not keeping track of your important deadlines such as payroll, GST, corporate and personal tax deadlines. This can ultimately lead you to various interest and penalties and that can add up quick and impact your ability to receive any government funding or potentially small business loans. To help with this issue, you will need to learn what your compliance deadlines are and set reminders up in your calendar so you can stay on top of these deadlines.
5. Not using an accounting software
As your business grows and the umber of monthly transactions increases, it becomes increasingly difficult to keep track of everything. When year end comes around it will take much longer to summarize all the transactions which will cost you more money from your accountant. Additionally, having no accounting software opens you up to more errors and no ability to evaluate the performance of your business. Using an accounting software is important to keep track of your chart of accounts as it can helps you understand more about the numbers of your business, significantly reduce year end accounting fees, and includes various controls to help minimize errors.
6. Not using an expert
By not utilizing an expert to complete your bookkeeping or complete your year end services for tax time, it could affect your ability to maximize your tax credits and deductions. In addition, if you were to do the work yourself and it is time consuming, you would be losing valuable time that could be better spent growing your business. Hiring an expert to handle your accounting and bookkeeping will allow you to spend more time on the most important aspects of your business. These experts will help you save money as they can complete your work in a more efficient manner than if you were to be doing the bookkeeping yourself or hiring an inexperienced employee.