Starting a business is tough, and it is made all the more difficult when you are also handling all the financial reporting for your business. Here are our top five common bookkeeping errors that we see occur with clients and new companies.
Mixing business and pleasure
Mixing your business and personal finances might seem like it is saving you time, but in the long run, it can be a costly mistake. Using a company credit card for both your business expenses and your expenses can make it a time-consuming process when it is time to record these transactions. Which items were for your business? If you always use your corporate card for only business expenses, there will be no doubt that the trip to Costco last month was for company supplies.
Forgetting to reconcile the bank accounts on a monthly basis
There are some great programs out there such as Quickbooks Online which allows for your bank transactions to be automatically downloaded. However, if you don’t do a proper reconciliation (checking to see what cheques are still outstanding, what deposits have not yet cleared), you could end up double recording some items.
It is far easier to discover these double recorded entries or missed items if you reconcile monthly rather than five months after the fact.
Not creating a system for your receipts
In the CRA’s eyes, your bank statement is not sufficient to support for the deductibility of the expenses you are claiming. While your accountant might not need to look at every invoice you have, CRA might one day ask for them. Instead of throwing that receipt into your purse or your truck, take thirty seconds at the end of your day and put it into some record keeping system. If that is a file folder for each month, great! If you are doing it by type of expense, fantastic! Develop some system that works for you so that if Revenue Canada comes calling, you can bring out the pertinent information.
Pushing it off to the last minute
After a long day, the last thing you want to do is go home and do budgeting and balancing of your books. However, putting this off can potentially result in inaccurate information on how your business is doing. Are you charging your clients enough, or are you funding their project?
- Hire an accountant to deal with this, so you don’t have to! Your accountant can meet with you on a monthly basis or send you monthly reports, so you are always aware of your status.
- Set aside a time each week where you can deal with the administrative hassles of your job.
Not understanding GST
When you reach a certain threshold, you need to start collecting GST. When you collect GST on the sale of an item, it can feel like you suddenly have extra money in your pockets. But watch out! When you collect GST, you are collecting it in trust for the government. Therefore, you need to ensure that you always have those funds ready to remit.
Our team at JMH is here to help you with your financial success – together we can ensure you don’t have to worry about these five mistakes!