Phoenix Accounting & Consulting

Helping business owners understand finances
so they can how
to grow their business

Helping business owners understand finances so they can how to grow their business

4 Common Bookkeeping Mistakes & How to Avoid Them

bookkeeping helpEntrepreneurs, especially in start-up mode, try to do too many things themselves and attempting to do your own bookkeeping is top of that list. Truthfully, record-keeping can be tedious and often takes up hours of valuable time that can be spent in other areas of your business. This is the primary reason that well over one-half of all small business owners do not keep their finances up to date on a monthly basis. Bookkeeping, as mundane as it may appear, is actually your biggest secret weapon when it comes to business management and growth. It is only with accurate and consistent measurement of a company’s financials and other key indicators that we as business owners can effectively manage and expand your business.

Here are the 4 of the most common bookkeeping mistakes you need to avoid:

  1. Improper handling of banking information. Not keeping separate bank accounts for personal and business activities, or worse, paying for personal expenses with business accounts. This is a big “no-no” and contributes to time consuming review and analysis of your records, particularly at year-end tax preparation time. If you are audited, you will need to provide complete records of business-related activities and fines can be very steep if there are personal expenses included in your business accounts.  In addition, make sure that your bank and credit card statements are properly reconciled every month. This will help to minimize errors and identify many potential issues, including any co-mingling of expenses.
  2. Improper or poor record keeping. Improper or poor receipt and record keeping is common for businesses. It is easy to lose receipts or forget about those small expenses that seem insignificant. Maintaining accurate records on a monthly basis and with a proper accounting system can save you time and money on your income taxes. It can also provide the necessary documentation in the event that you are audited by the CRA. There are many automated platforms that can integrate with your cloud-based bookkeeping system to seamlessly record and organize your financial data. Ask your bookkeeper or accountant for options that will work for you.
  3. Lack of proper sales tax knowledge. With many businesses, not reporting sales tax (GST, PST, HST) and not accounting for it is a very common error in bookkeeping. Oversight in the collection and reporting of sales taxes can result in significant fines and penalties. This is compounded when you have online E-commerce. Having your books and records managed by a professional bookkeeper or accountant will avoid costly mistakes, penalties and interest.
  4. Failing to seek professional help early on. Many business owners try to do bookkeeping themselves or do not have the professional help they need. Although we all know that time is money, many business owners do not put enough VALUE on their time. How you value your time is extremely important to your business. Leave the tedious and time-consuming task of bookkeeping to the professionals. A bookkeeper will know what to record, how to record it, and most importantly, the accounting changes that affect a business on an ongoing basis. This alone cannot only save you time, but it also frees up more of your time so you can focus on growth and taking your business to the next level.

Now that you have read through some common bookkeeping mistakes, take a look at your business and determine whether any of these apply to you. Now is the time to make some easy changes to upgrade your bookkeeping system and turn that mundane task of bookkeeping into your secret weapon for business management and success!

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