As a small business owner, you might look at bookkeeping as a necessary evil, something you have to put up with. We often face the tedious and mundane task of spending hours and hours on the same thing. The reason why well over half of all small business owners fail to keep their finances up to date is due to this. It might seem mundane, but bookkeeping is your greatest weapon when it comes to managing your business and growing it. Businesses can only be managed and expanded if the company’s financials and other key indicators are accurately and consistently measured. Here are Six bookkeeping mistakes that might take you down.
Improperly Categorizing Expenses
You may face problems if you do not know about formal bookkeeping practices or have not hired someone who does. The correct categorization of income and expenses ensures accurate profitability measurement. Tax savings can also be achieved by understanding how each income and expense category is taxed.
Bookkeepers and company employees must communicate effectively. Involve your bookkeeper in the business and keep them updated. Your bookkeeper will be able to create financial statements that accurately reflect your business’s operational needs.
Not Reconciling Bank Accounts.
It can be difficult to manage personal and business finances if you do not have separate bank accounts. Your business-related expenses may need to be separated from your expenses if you are audited. You should keep track of your monthly bank reconciliations. Identifying problems and minimizing errors will be easier this way.
Ignoring Small Transactions
You can easily forget about minor transactions such as office supplies that you picked up en route to work or the freebie you sent to a loyal customer. Nevertheless, it’s important to keep a record of the transaction, no matter how small. The CRA will require you to provide records of ALL business expenses, even the smallest ones if you are audited.
Neglecting Sales Tax
This one task often gets neglected when you have a long list of things to do. Ensure that you are compliant and stay on top of things by speaking with your CPA.
Most of these mistakes stem from guessing. To keep your books accurate, ask questions and make sure you understand proper bookkeeping protocols.
Reporting Transfers As Income
Making informed decisions about your company and its financial health is possible with an accurate financial statement. If you make this particular mistake, your records could lead you to make decisions that are not in your business’s best interest.
The most convenient and efficient method for managing your business finances is to entrust your bookkeeping to professionals, even if you are aware of these common bookkeeping mistakes. In addition to integrating the most suitable cloud accounting software for your business, we will also train your employees on its proper implementation. You can contact us for further information.
Sohail Afzal, CPA, CMA, MBA
Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.