Common Bookkeeping Mistakes New Start-Ups Tend To Make

Congratulations.  You are starting a business!  Some of the feedback we get from new entrepreneurs is how they want to save money by doing their own bookkeeping. Bookkeeping is an integral business function that helps you uncover the financial state of your company. It is critical to it’s success that you don’t let your inexperience cause common bookkeeping mistakes.  This can distort the reality of your businesses’ financial outlook. Bookkeeping is a broad based function with several components within it, so it’s no easy task.

Bookkeeping is the practice of maintaining records of financial transactions that the company generates. The process is time-consuming and needs a high attention to detail.  The process still remains just as important as any of your other important financial functions. This is why it is so important to identify (and never repeat) the common bookkeeping mistakes that start-ups tend to make.

Inexperienced As A Bookkeeper

Most business owners would be quick to admit that they’re not skilled bookkeepers themselves, but wouldn’t hesitate to maintain the books themselves. This is a dangerous strategy, especially for a start-up when there are so many other important tasks to focus on.  Often, it’s the books that get put off to the side until they have more time.  This causes a lot of problems for the entrepreneur when it comes to filing G.S.T. returns, corporate taxes, etc.  Or in recent months, a delay in government Covid support.

Poor Record Maintenance

A common bookkeeping mistake is not having a proper system in place to ensure the collection and storage of regular expenses that your company incurs. Not only does this raise further complications later on when you’re preparing your tax returns, but this also endangers the reliability of your data.  It also negatively impacts your ability to determine your company’s financial health, and your ability to get the right numbers. Often, entrepreneurs are making key financial decisions in their business  without knowing the accurate financial picture.  This has the potential to set you up for failure in your business.

Not Tracking Transactions Correctly

Certain business expenses that you incur on a day-to-day basis can be deducted when you’re preparing your tax return. What generally tends to happen is that you’re not keeping accurate records, and not saving the necessary slips.  This puts you in a position of being highly likely to lose track of these expenses (a common bookkeeping error). This generally happens because of inexperience as a  bookkeeper. Another common practice that complicates the process is making a few payments from your personal bank account (for the business) and not adjusting  them later on. At the end of the day, your business suffers as you end up paying extra tax dollars to the Canadian Revenue Agency.

At Padgett Business Services, N.W., it is our business to provide comprehensive accounting and bookkeeping solutions to small businesses in order to allow them to concentrate on the other key areas of their business. You can contact us to learn more about our services.