Common Mistakes People Make With Bookkeeping
Whether you own a small business or a big firm, bookkeeping is an essential part of any business. However, with new rules and regulations being introduced every now and then, maintaining your accounts and doing your taxes accurately can be difficult for business owners. Moreover, even the slightest mistake could lead to heavy losses and put your business at risk. To help you steer clear of these situations and prevent any accounting and tax issues, Aimee Lococo-Sarabura, CPA, has compiled a list of the most common mistakes people make with bookkeeping that you should avoid.
1. Not retaining supporting documents
We’ve seen many clients commit the mistake of not retaining supporting documentation, such as receipts, statements, bills, etc. Sometimes clients forget to get a copy or don’t realize the importance of having a back up for expense claims. Clients should care about correcting this mistake, as the Canada Revenue Agency will deny a claim if adequate or sufficient supporting documentation is not provided in the event of an audit. Clients would do well to set up a system of storing receipts, whether that is in folders on a monthly basis or by expense type, or in a cloud platform.
2. Using their business bank account or credit card for personal purchases
Many business owners don’t understand that their personal expenses should not get mixed up with the business’ expenses, as it can create confusion. Maintaining separate records and accounts for personal and business finances eliminates the risk of accidentally claiming personal expenses within the business. If personal expenses are detected during a review by the Canada Revenue Agency, it could result in severe fines and penalties as well as reassessments of the applicable periods. A business owner could fix this mistake by having a credit card and bank account dedicated solely for business and a separate bank account and credit card for personal use.
3. Rounding the cost up of an expense
Customers sometimes round the cost up of an expense to the nearest dollar for simplicity when providing information to their bookkeeper or accountant. Customers feel the rounded number is close enough when reporting to governing bodies. First, if the numbers don’t agree with what has gone through the business bank account or credit card, it will be impossible to reconcile those accounts and have accurate records. Second, if the Canada Revenue Agency reviews the supporting documentation and it doesn’t agree to what has been claimed, it could result in an adverse ruling and subsequent fines.
To avoid these and other mistakes related to bookkeeping, reach out to Aimee at Aimee Lococo-Sarabura, CPA. With a firm grounding in accountancy and over fifteen years of hands-on experience, I can help you manage your personal as well as business finances and improve your solvency. I am known for assisting my clients in resolving their accountancy and taxation issues in a swift and efficient manner. I provide a full range of accounting, bookkeeping, and taxation services to clients across Elmvale, Midland, Barrie, Wasaga Beach, and Collingwood, ON.