Once the end of the year draws closer, you start putting your bookkeeping processes under the microscope. Most business owners leave the task till the last minute which increases the risk of making mistakes.
However, making simple bookkeeping mistakes can be detrimental to your business and can cost you thousands of dollars. It can also expose business owners to fines.
Here are common mistakes in DIY booking.
The first mistake made is using complicated computer software
Most business owners don’t have understanding of double entry accounting which could result in shoe box packed information. This exposes you to tax audit or require your accountant spend money, time and effort in sorting out.
Not claiming valid tax deduction
This is another mistake that business owners make; not claiming valid tax deduction means you are short-changing yourself. Most times, not claiming valid tax deduction is because business owners do not keep accurate cash expenditure record.
Mistakes when it comes to GST/HST
This is a common DIY accounting mistake that is easy to fall into and quite easy to avoid.
The mistakes are;
- To claim GST/HST credits where the supplier is not registered for GST
- To claim GST/HST credits without valid tax invoices
- To claim GST/HST for full amount of purchase when goods are used partially for private purposes
Late invoicing and letting debtors fall through the cracks
Due to tight schedules, business owners most times make mistake of getting invoices out to their customer when late. To the customers, it means the business does not care about getting their money.
Ensure there is an appropriate system that keeps track of debtors and how they make their payments. Giving debtors the room to fall through the crack is detrimental to the business cash flow.
Making mistakes when paying employee CPP and EI
The compulsory payroll charges made by employer on behalf of eligible employees. Regardless of whether the business is a small or large business an employer must contribute the equivalent of 4.95% on the first $55,900 of income from each employee and approximately $1.82 per every dollar paid on the first $51,700 on Employment insurance. Also, if you are self-employee you will be paying 9.9% on the same amount of income, but EI is optional.
Another DIY bookkeeping mistake is missing deadline for Payroll, HST and WSIB remittances
This can mount unnecessary pressure on the business owner and the business. Psst.. did you know that if you reached $30k in revenue within a 12 month period, you will need to start collecting HST to your customers/clients.
Making mistake of not checking bank records for accuracy
This needs little or no explanation, but it is one of the mistakes that cannot be overlooked.
Not keeping back-up records
Backup copies and systems needs to be in place to safeguarded the financial file of the business in case of technical breakdown. But most business owners don’t show vigilance and lose files.
In conclusion, inadequate procedures and heavy workloads have forced most business owners into making little and complicated mistakes while recording the book. Other causes included variety of task, last minute rush, lack of bookkeeping know-how etc.
Remember making mistakes can cost you thousands of dollars and there is more that can be benefitted from recording the book. Save yourself the stress and get the maximum benefit by working with a pro.
Don’t short-change yourself.