Updated: Aug 24
Accounting is the practice of documenting the sources and destinations of one's financial resources. It also involves knowing which expenditure account to put each item into, and reconciling your books is the key to a successful accounting process.
Every company's financial health depends on bookkeeping. As a company owner, you'll need to review your financial records when making long-term plans, making essential choices, and filing taxes.
In addition, you can only use the books if they're in good condition and are up to date. If you're running a small, self-funded firm, you can be in charge of keeping the books if you don't have access to an official bookkeeper.
When your company is just getting off the ground, it's okay to act as your bookkeeper. It is essential, however, to ensure that your records accurately represent your current financial status.
You'll be making business judgments based on incorrect data if you don't have an accurate record. Read on to know some common bookkeeping mistakes.
Common Bookkeeping Mistakes
Not Doing Bank Reconciliation
Having a single bank account for both personal and corporate transactions might lead to problems in the long term. Your costs and work expenses should be kept separate if you expect to be audited.
You should consistently verify the accuracy of your bank accounts by doing monthly statement reconciliation. This will aid in reducing mistakes and identifying possible problems.
Not Collecting or Remitting the Correct Sales Tax
Sales tax has become a complicated problem for many small businesses due to the growth of e-commerce in the last ten years.
A common blunder is subtracting sales tax from the total sales, resulting in a large tax bill at the end of the year. Sales tax collection has been made more complicated regarding online, state-to-state fulfillment because of recent changes to federal law.
If your bookkeeper knows the most recent regulatory changes, you may stay in compliance and reduce your total tax burden.
Not Recording Small Purchases
Even the most successful business owners may get behind when keeping track of company transactions. There's no need to be alarmed if your ticket meal is missing, but it might add up over time if you don't pay attention.
In addition, you don't want the government snooping around your every move to see whether you've claimed costs and have no proof to back them up.
Keeping track of the tiniest transactions helps you deal with the larger ones. As your company expands and the volume of transactions rises, you'll find it easier to keep track of your books.
Combining Personal and Business Expenses
In the early stages of your company, you may find yourself making business transactions with funds from your bank account or credit card.
Alternatively, you might make personal purchases with company monies. This is careless accounting since you'll have to deal with all of these transactions in the future.
When it comes to your company costs, you may lose track of them, which might result in you missing out on crucial tax deductions.
Having a specialized corporate bank account is the best way to prevent this problem. You'll find it much easier to keep your books in order.
Outsourcing your bookkeeping needs is an option if you want to free up some of your time. Investing in specialized expertise is a wise move that will pay dividends in the long run.
You need to be able to put your faith in your professional bookkeeper to assist you in expanding your business and avoid common bookkeeping mistakes. With the aid of Correcords Bookkeeping, you can ensure that your accounting is up to date and well-organized. Contact us now at www.correcords.ca