Most Common Bookkeeping Mistakes

(And how you can avoid them)

1. Allocating items to the wrong account

You can easily allocate items to the wrong account simply by entering an Asset as an expense or Vice Versa. An Asset is an item purchased for over $500 and it must be written off over time, not all in one year. Many people will buy a car, computer or equipment and put it into an expense account. Their accountant will usually catch this at the year end, but it costs time (which is money). Also allocating things to expenses that should go into an Equity account like 'Owners Draw' or 'Shareholder Loan is a mistake. If you purchase something for yourself with the company's funds, you need to allocate it to Owner's Draw (if you are sole proprietorship) or Shareholder Loan (if you are Incorporated).

2. Not understanding your accounting system

If you are frustrated with your accounting system and you are spending lots of time on the phone with the software's help line, you might consider switching to something easier or taking a few classes. Entering an invoice when you should be entering a receipt or trying to fudge a bank reconciliation can be very costly down the road. If you don't understand your software, get training or look for a new one.

3. Getting behind on your Remittances

If you are behind on your CRA remittances, you are not alone. However, this simple mistake can cost you thousands of dollars and I have even seen peoples' bank accounts get frozen until they sorted it out. The CRA wants you to file on time and file correctly. If you are not sure of how to do this, then get help. It will cost you more in penalties and interest than it will to hire a bookkeeper to keep you sorted out and on time.

4. Not Filing Taxes on time

The CRA allows you 3 months from your year-end date to file/pay your taxes if you have money owning. If you do not owe then you have 6 months to file. If you are not sure if you will owe, then you need to get your files to your accountant/bookkeeper within 2 months to give them time to file your taxes. Getting behind on your business filing is serious. The CRA is very adamant that you file on time and it can hold up your Benefits if you do not file on time as a sole proprietor.

5. Not getting help when needed

The biggest mistake I have seen people make is not hiring a bookkeeper when they really need one. I am not talking about Cousin Mary or Uncle Bob. I am talking about a professional. Most times, when I take on a new client who is really behind or recently found out that their relative did not actually know how to handle the books, I am able to quickly save them MORE money than they pay me to fix it! Many people think hiring a bookkeeper is costly...and it can be, IF you get a bookkeeper from an accounting firm. However, independent bookkeepers such as myself, charge far less than accounting firms and save our clients hundreds to thousands of dollars every year. Not getting help when you need it is not a smart business move, it is better to prevent problems and keep your books straight then to have to pay big $$$ to clean up a big mess later.

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