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Top 5 bookkeeping mistakes that could be costing your business big bucks

By Belso Bookkeeping

#1 Not staying on top of your receivables

One of the joys of doing business is being able to cash in on your products and services. Keeping track of these receivables can, however, be far less exciting. When you issue an invoice to a customer, a receivable is recorded. Once payment is received, it gets applied to this receivable and showed as paid. Pretty simple, right? In theory, yes, in practice, not always. There are only so many hours in day, and receivables can sometimes go for weeks or even months without being reconciled.

Consequence? Comes tax time, and awful lot of time will be spent figuring out who owes you money, and even more time will be spent chasing clients who thought they could get away with not paying you in a timely manner.

Solution? Stay on top of your receivables by reconciling on a monthly basis, and don’t hesitate to follow up with clients who often pay late. Your time is valuable, and part of running a business is making sure that you don’t only have money going out, but money coming in.

#2 Badly organized or missing expense receipts

Many business owners often fail to stay on top of that pile of receipts or business expenses. Month after month, it’s the same series of questions: What was that $50 interac purchase for? What on earth did we buy at the xyz store? Any idea what this expense was? Consequence? This can result in a series of cash flow, tax and accounting problems, and could end up costing you $$$ in the long run if you get audited.

Solution? First, make sure to separate all of your accounts: business accounts and credit cards for business purchases only. Second, keep an envelope or box in your vehicle in which you can store your receipts for every business purchase you make. Then once a week/month, go through your receipts and make sure they are all relevant and organized.

#3 Not recording cash expenses

I cannot stress enough the importance of keeping track of your cash expenses. While debit and credit cards have statements to refresh your memory, the $20 note in your pocket can go just about anywhere without leaving a paper trail or clue as to what it was used for. Consequence? Not recording all those cash expenses can leave you overstating your income, affecting your tax return and overall profitability for the year.

Solution? Find the most convenient way for you to keep track of your business cash purchases. For example, keep your cash in a designated envelope or cash box, and make sure that when you take money out, you replace it with the receipts accounting for that amount.

#4 Leaving it all until the 11th hour

As tempting as it may be to leave all of your bookkeeping for the very end of your financial year, it’s never the best idea. Sure, days are short and you’d rather work on other aspects of your business such as sales or marketing, but one of the most common mistakes made by small business owners is not staying on top of their books on a monthly basis.

Consequence? Not reconciling your accounts on a regular basis will keep you from getting a clear picture of how your business is doing. Financial statements are a business owner’s best ally, and producing them only once a year does not allow you to make effective decisions that will improve your revenue and grow your business.

Solution? Make a to-do list of everything you should do on a monthly/quarterly basis: reconcile payables/receivables, reconcile bank and credit card statements, review sales numbers, etc. If you don’t have enough time or resources to maintain accurate and up to date books on a monthly basis, don’t hesitate to get help from a professional bookkeeper.

#5 Not hiring a professional to handle your income tax

While we would all love to save money on professional fees, it is not the best area in which to cut cost. Professional accountants have the necessary tools and knowledge to get the most out of your tax return, and while doing your own taxes might save you a few bucks at the end of the year, you might be missing out on important deductions or pay an incorrect tax amount.

Consequence? The few bucks saved might end up costing you a lot more down the road if you miss deductions, miscalculate your amount owing or underpay your taxes – leading to unwanted penalties and interest.

Solution? Paying a bookkeeper can also end up saving you in the long run. While professional accountants are better qualified to file your year-end taxes, they also have a higher hourly rate. Having a bookkeeper produce accurate financial statements throughout the year will not only save you on your accounting bill, but will ensure that your accountant has all the necessary information to produce the best tax return for your business.

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