8 Top Bookkeeping Mistakes by Small Businesses
Get familiar with these top bookkeeping mistakes by small businesses so that you know how to prevent them.
1. Not using a professional accountant
Hiring a “real” accountant (as opposed so your aunt, who is really good with numbers) is crucial to the growth of your business. They are experts in their field and well worth the investment. A great accountant can help you with things like developing the best financial strategies, plan year-end tax moves, and ensure that you get the highest tax deduction on your return. Forgive us for putting this as number one, but it really is a big one.
2. Hiring unreliable bookkeepers
Similar to point number one, when looking for someone to keep track of your books, it’s best to hire someone with substantial experience in your area of business. Not only will your books be more organized, but they’ll be able to offer you valuable financial insight.
3. Mixing personal and business spending
Paying for business expenses with your own money can be a dangerous habit and could even cause legal problems in the event of an audit. Consider getting a bank account or credit card specifically for your small business so that it’s easier to differentiate between your funds.
Bookkeeping is a hassle for most business owners because of the big learning curve it requires. Not keeping up with your books due to lack of time or fear of messing up can lead to huge bookkeeping errors. You should be checking your books on at least a monthly basis.
5. Tossing out receipts
Not everyone has the patience to keep track of every little slip of paper. Since receipts are essential to prevent a future audit, it’s best to keep electronic records of your receipts. It’s also good practice to keep your receipts for seven years after the transaction.
6. Not reading financial statements
Reading financial statements is essential in order to create budgets, control your cash flow, and make the best financial decisions for your business. Failure to do this may lead to you missing out on big financial opportunities in the future.
7. Not including the PST, HST
Not knowing about tax requirements could land you in big trouble with the CRA. If you’re unsure about your tax obligations, be sure to ask a professional accountant. Some industries are particularly prone to “forgetting” about the tax in order to offer a “discount” to customers. Be aware that if the CRA comes calling it could lead to big problems!
8. Counting payments to yourself as expenses
It’s an easy mistake that presents a false total for taxable income and lowers your profit.
Need help with any of these bookkeeping mistakes by small businesses – numbers one and two in particular? We can help! Contact us to set up a time to discuss the accounting and bookkeeping needs of your small business.