Common Mistakes People Make With Their Bookkeeping

Author: Kim Freestone | | Categories: Bookkeeping For Accountants , Bookkeeping Services , Management Accounting

Blog by Freestone Associates

When you own a small, growing company, quality bookkeeping is an essential ingredient. However, new tax rules and regulations and the owner being pulled in too many directions makes it very difficult to maintain the books and the tax requirements accurately and on time. If you make the slightest mistake, it could lead to heavy losses that put your business at risk. To help you steer clear of bookkeeping pitfalls that could lead to accounting and tax issues, the experts at Freestone Associates have compiled a list of the most common mistakes people make with bookkeeping.

1. Double counting sales
Accounting is a meticulous process. You have to enter the right amounts, dates, taxes, and customer details thoroughly. When making entries, you need to ensure there is no double counting in your ledgers and balance sheets. Double-counting revenue might make you feel good temporarily but it will lead to paying more taxes than you need to, it will distort your need to deal with reality, and it will cause a lack of trust with your shareholders and investors. 

2. Carrying too many receivables
In an effort to nurture long-term loyalty, companies may offer their loyal customers the flexibility of paying for goods or services long after they are purchased and consumed. Having high sales feels good, but high receivables is a very dangerous game to play. If you allow your receivables to get too high or too old, it will lead to unnecessary financing costs and, in severe cases, a cash crunch that will force you to close your doors. 

3. Double paying vendors
Double payment or duplicate payment is a major financial drain that organizations face today. When you accidentally pay the same invoice twice, you’re tossing money away unnecessarily. This eats into your margins and inhibits your company’s financial progress. Some double-pay cases occur due to a vendor’s duplicate invoicing or you simply flying on autopilot.

4. Not reconciling accounts properly
Account reconciliation is an important step to ensure the completeness and accuracy of the financial statements. More specifically, you must reconcile all balance sheet accounts that could contain a significant misstatement. Reconciling accounts properly and in a timely manner, will help avoid the missteps of double counting or overlooking revenue and expenses.  

5. Running payroll for shareholders
Payroll management is a crucial aspect of business functions. It is essential that you understand the difference between income and the repayment of shareholder loans. To understand this difference is to avoid serious consequences with the CRA and to legally minimize your personal and corporate tax burdens. Let a professional handle your bookkeeping and accounting needs, payroll and taxation responsibilities in order to avoid expensive pitfalls. 

6. Mistakes with HST
It is imperative that you apply HST rules correctly. Mistakes with sales tax can lead to overpayment of sales tax or underpayment. If you underpay your HST you can be sure that the CRA will come knocking and the ensuing interaction could go very badly for you. Alternatively, if you use the right professionals to look after your bookkeeping, then the thoroughness and efficiency will make any HST audit a breeze, and you would remain stress-free and feeling confident that your taxes have been minimized legally.  

To avoid these mistakes and get to the optimal outcome, reach out to the experts at Freestone Associates. We have over thirty years of relevant, multi-industry bookkeeping and office management experience to ensure your bookkeeping is done with keen attention to detail and pragmatic business sense. Timely and reliable bookkeeping services will lead to improved cash flow for your business.

We want to add the value that will stabilize your business and provide the right foundation for business growth. We also offer cloud accounting solutions, accounting software set-up, QuickBooks training, and support. Our services are available to clients across Etobicoke, Toronto, Mississauga, North York, Oakville, Vaughan, and the surrounding areas. For a complete list of our services, please click here. If you have any questions about bookkeeping, we’d love to hear from you. Please contact us here