Top 10 Bookkeeping Errors
As a small business owner, bookkeeping is likely the very last thing on your To-Do list. The tedious task of bookkeeping can take up most of your day if not done often and regularly. You may have a bookkeeper or maybe you are just getting started with your business, here are 10 common bookkeeping errors you need to avoid.
Failure to communicate
Having a part-time or outsourced bookkeeper is only effective if you communicate. Ensure your bookkeeper is filled in on transactions that happened so they can be classified accurately. Set a monthly meeting to go over reports and budget.
Failing to track reimbursable expenses
Not tracking your expenses is like flushing money down the toilet. Small business owners often pay for expenses out of pocket or with their own personal credit cards as a result make the mistake of failing to track these expenses.
Failing to keep proper
records
Holding onto receipts for business expenses is essential. When it comes to audits from CRA, you need to keep every business expense receipt for at least seven years. Paper receipts can be hard to keep track of so make use of the free storage space that google offers to save digital copies of receipts.
Procrastinating your Bookkeeping
Procrastinating your bookkeeping won’t grow your business at the rate you want. You need to know where your business stands financially. Making poor decisions based on inaccurate bookkeeping can have a negative impact on your business when it comes to seeking loans, hiring employees, and investing in your business. Set out time weekly to look at your books.
Wrong Categorization
Maintaining a clean and organized chart of accounts is critical for your small business. While most expense categories are fairly standard and straightforward, the mistake many business owners make when doing their own bookkeeping is creating duplicate categories or failing to enter expenses into the appropriate category. Use general guidelines and simple terms when creating your chart of accounts and create as few as possible.
“The price of inaction is far greater than the cost of a mistake.”
Not Deducting Sales Tax
There has been a massive increase in E-commerce business over the last 10 years and sales tax has become a complex issue for many small businesses. Failing to deduct sales tax from sales translates to significant fines and penalties from the CRA.
Not classifying employees correctly
With so many contractors, consultants and freelancers it can be hard to determine who is on staff and who isn’t. When not sure how to classify an employee, call the CRA or National Payroll Institute to get help. Payroll tax penalties can be huge and you want to avoid that.
Like other areas of life, budgeting is essential for the life of your business. Keep track of major expenses, government dues, credit card payments, and how often they happen on a budget. Add them to your calendar and be conscious of when money is pulled from your account. Avoid paying NSF fees to banks and keep the money in your business for other important expenses.
There you go.
CoWork Bookkeeping will help you to set up your chart of accounts and more, plus help you find ways to save money, time and run your business more efficiently.