5 Super Common Small Business Accounting Mistakes

5 Super Common Small Business Accounting Mistakes

Man on computer, dog with man on computer

Like all new things in life, such as starting a new small business, hiring new staff, or raising a new office puppy, there are some things you can expect, and there are some things you end up learning by trial and error.

For example, you expect your new office puppy to chew on your shoes, but you feel confused when you watch him trying to eat your office granite bathroom floor.

Similarly, in small businesses, there are some common accounting mishaps that can feel as if they are coming out of nowhere.

However, your friends at BDG (and our office puppy) are here to stop you in your tracks before you make these super common small business accounting mistakes…

1. Failing to back up data

Sometimes computers crash to teach us that everything in life is temporary, that we have no control over anything, and that we should have signed up for cloud accounting.

However, if you do want to store your accounting data on your hard drive, please, please, please back her up. Believe us. You will be jumping for joy if your computer crashes when you have a back up ready to go.

2. Lagging Behind in Entries and Reconciliation

We understand. It can be extremely easy to want to put off entering accounting data. However similar to letting dishes pile up in the kitchen, procrastinating on an accounting final, or running out of pumpkin spice gluten free waffles, putting off entering your accounting data can negatively effect you.

When you procrastinate entering your financial data, your reports aren’t current, and you don’t really know what financial position your business is in. This could lead to poor business decisions and perhaps spending money you don’t actually have.

The good news is with cloud accounting systems you can make staying up to date with data a whole lot easier. Cloud software connects to bank, credit card and PayPal feeds allowing transactions to automatically flow into your cloud accounting system in real-time.

This means organizing your data is as simple as clicking a few buttons to sort your transactions. Easy!

3. Throwing Away Receipts

Although you can digitize receipts quickly and simply by taking a photo of them with cloud accounting software such as FreshBooks, you still need to keep your physical receipts.

According to QuickBooks, “receipts provide answers to any mistakes or gaps in accounting records, and many offer additional deduction opportunities come tax time.” They are also important to have if the CRA come by and need some answers about your accounting.

4. Not Keeping Personal and Business Expenses Separate

Putting all your bills on one account can get confusing. After a year, you may not remember whether the organic ice cone machine you bought was for your company’s launch party or for your Aunt Mable’s 72nd birthday bash.

Keep things simple and create two separate accounts for your personal and business expenses. Firstly it saves time and secondly it can help you avoid piercing the company veil. Bench give a beautiful definition of piercing the company veil and describe it as: “if you operate a corporation or limited liability company, you can be held personally responsible for company debts if there is no clear distinction between your business and personal expenses.” And really, who wants that?

5. Not hiring an accounting professional

There’s a reason why 29% of Canadian small business owners admitted that accounting and bookkeeping is one of their biggest challenges according to the Globe and Mail. If you don’t have a lot of accounting experience, chances are there are accounting processes you may miss or do incorrectly which could mean you could lose money.

Rules and regulations are always changing. Accountants are up to date with the latest news to help you and your business. They can also analyze your financial data to help you make future business decisions.

We know accounting can feel overwhelming. We help plenty of businesses organize their accounting so that they can do what they do best – help people and make money.

Schedule a free consultation with us today, and let’s chat about how we can help you boost your profits.

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