Every business has to deal with bookkeeping. From small startups to big corporations, no business can avoid the tedious task of accounting and bookkeeping. It is a crucial part of small business success mainly. However, if not done correctly, it can be utterly ruinous. Therefore, business owners should understand the balls and chains of bookkeeping to eliminate the financial headaches associated with wrong or poor management.
BOOKKEEPING HITCHES THAT SMALL-BUSINESS OWNERS SHOULD STOP DOING
Bookkeeping is often considered a tedious and challenging task that can take up a considerable amount of time. This leads a small business owner, in particular, to hire a professional bookkeeper in Etobicoke. But often, hiring or outsourcing here sounds to be an unnecessary expense for many startups and small businesses. However, many small brands and services fail to keep their finances updated. However excessive it may seem, bookkeeping is the most crucial tool for business growth and management. We can effectively handle and grow our business by having well-managed, up-to-date, and consistent financial statements.
Here are some mistakes small business owners should avoid.
Poor and inexcusable record management
For any business, inept record-keeping is not uncommon. Inexcusably and poorly managed business records can easily get lost or misplaced. It is easy to forget things you bought for your business, receipts, and it's even easier to place paperwork in the most unorganized pile. As a result, most small business owners, either sole proprietors or corporations, aren't aware of what they can claim while submitting taxes to CRA, and they miss out on tax write-offs. A well-organized filing system and appropriate record-keeping help you save a lot of money. If CRA audits a business, they will verify the documentation. However, it needs to be precise and up-to-date.
Accessing business bank account for personal banking
Business and personal bank accounts need to be different. Using a business account for private banking is a mistake often made by small business owners and startups. A business is a separate object from the owner. Unfortunately, many companies, in particular, don't understand this concept and keep using their business account for personal banking. This mistake causes many issues.
- The amount withdrawn is considered a shareholder debt - Repayment of shareholder debt must be within one calendar year of the tax end date. If not, the company will be deemed to have failed to repay the debt. According to CRA, the debt amount added in the income and the interest at a fixed rate will have to be paid.
- Tracking cash flow can be more challenging - Once the money is spent out of the corporation, it becomes difficult to monitor and control the cash flow. The mistake can further result in severe financial issues for the company. However, it is crucial to have clear expectations of salary or dividends right at the inception.
Not settling down the bank accounts
Keeping separate bank accounts for business and personal financial activities is crucial. Not having them different can cause severe issues. The business owner will need to submit updated records of all business activities when being audited. However, keep a check on your bank account. It would help if you reconciled it at the end of each month to minimize the possibilities of errors.
Overlooking sales and payroll tax
Many startup business owners do not know that they have to have a GST number once their sales exceed $30,000. Also, they fail to set up a secured deduction account which is again very crucial. Such mistakes only happen for not being aware. The professional, certified, and affordable bookkeeping services Etobicoke can help you ensure that your accounts are organized in the right way right from the beginning. The most common mistakes business owners often make are not reporting sales tax or accounting for it. You can encounter penalties and fines if you don't monitor these accounts. Besides, this mistake can also harm the business's ultimate result.
Having weak communication
Effective communication between the bookkeeper and employees is crucial. The certified bookkeeper should be well-informed and connected to what is happening in the business. Staying informed will help the bookkeeper to create solid financial reports that can accurately reflect the business operations.
Failing to reimbursable expenses
Often, many startup business owners deal with their business expenses from their personal income. As a result, these expenses are often overlooked over time. Failure to record reimbursable expenses can lead to both loss of money and no tax deductions.
Incorrectly categorizing the expenses
Bookkeeping skill is not something you or your employees will have. However, dealing with inexperienced bookkeeping services can lead to problems for a business. To correctly measure profitability, it is crucial to track incomes and expenses within the correct categories accurately.
Kicking the can down the road, i.e., wasting time.
Many startup business owners try to handle their accounting and bookkeeping. Time is money! Unfortunately, many people do not value their time. Rather than kicking the can down the road, hiring a small business bookkeeping can help focus on the other crucial business areas. The bookkeeper can expertly manage the bookkeeping tasks. Expert bookkeepers know the right things to record, the right way to record something and all the financial and accounting changes that impact a business on an ongoing basis.
Ultimately, pay close attention to your business. See if there are any of these common mistakes you are making. If so, correcting the errors at the right time is crucial. Remember, the success of your business depends on how strong your books are.