Common Accounting Mistakes People Make And How To Avoid Them

Author: Priti Lad Professional Corporation | | Categories: Accounting Services , Financial Statement Preparation , Tax Planning Services

Blog by Priti Lad Professional Corporation

A cloud-based accountant and bookkeeper can help you with bookkeeping, account reconciliation, preparing your monthly financial statements, and filing your sales tax returns. They properly organize your financial records to ensure that your business operations run more efficiently on a daily basis and stay compliant with different levels of government bodies. The only difference is they can also provide you with a service that moves this entire process to the cloud, making it more affordable and easily accessible.

Accounting and bookkeeping is a necessary and vital process in running your business. Many people try to manage it themselves to keep costs down but make many mistakes in the process, such as poor record-keeping and missing the government deadline, to name a few. They look like simple tasks but being negligent could put your company in serious trouble.

To help you avoid some basic errors that could prove to be costly, Priti Lad Professional Corporation has put together a list of the most common accounting mistakes people make and how to avoid them.

1. Poor/improper record keeping
Not keeping receipts and records is common for small business owners. It is easy to forget about those little expenses that seem insignificant, but it adds up to significant costs for bottom-line profit. Maintaining accurate records on a monthly basis and with a proper filing system can save you time and money on your income taxes. It can also provide the necessary documentation in the event that you are audited by CRA. In case of a potential audit, accurate records of income and expenses could end up saving you in thousands of tax dollars.

2. Not separating business and personal expense
Not having separate bank accounts for personal and business activities can become an issue which complicates the accounting. Not only that, but it also creates tax issues for the owner as all personal transactions create a taxable benefit for the owner. Also, if audited by CRA, a person needs to provide complete records of business-related activities that are separate from your personal expenses. To avoid this, a business owner should keep a separate bank account and credit card for business and personal activities. This doesn’t just save time in doing bookkeeping but also saves you from a lengthy audit.

3. Not reconciling accounts
Reconciliation is the process of lining your books up with your bank statement. It consists of matching your bank transactions to those in your books and those in the bank statement for any differences between the two records. It’s generally a good practice to reconcile on a monthly basis. This way, it becomes easy to catch any missing transactions. The longer you go between reconciliations, the more out of touch you can become with your business’s finances.

4. Missing the government filing deadline
Most of the time, business owners have a long list of things to do, and not having done bookkeeping on time, they often miss the government filing deadline.

Hiring a bookkeeper to do the regular record keeping can help you stay on track for the filing deadline, which not just saves your money for all the non-filing penalty and interest but also saves time.

5. Doing it yourself
When running an extremely small business with limited revenue, it can be tempting to lower costs by handling the accounting on your own. While taking care of your accounting yourself might seem like a great way to save money, it could actually be costing your business money.

Hiring an accountant will cost you more than managing your accounts by yourself, but it will also save you money. From tax deductions that you didn’t know about to errors that are difficult to see in your own company but easy for an expert to notice, managing all of your accounting in-house causes you to miss an opportunity to save money.

To avoid these and other mistakes, reach out to the experts at Priti Lad Professional Corporation. I am a passionate and highly-skilled designated professional accountant with more than nineteen years of progressive experience. My mission is to offer insightful, advanced financial services and tools, so clients can focus on growing their business. I strive to provide practical, customer-focused, strategic solutions that will help increase profitability, while also securing the financial future for the business owners. The services I offer include bookkeeping services, payroll services, outsourced controller services, virtual CFO services, and value building services.

For a complete list of my services, please click here. If you have any questions about accounting, bookkeeping, and finance, I would love to hear from you. Please contact me here.