As a small business owner, you’re forced to wear many hats, especially at startup. But the experience of performing every function that makes your business run is invaluable and provides an excellent foundation for successful entrepreneurship. The key is knowing when to ask for help.
Accounting and bookkeeping are great examples of crucial business functions an entrepreneur will often do themselves, especially when trying to save every dollar they can. However, consulting an accountant in Toronto for small business every once in a whileis well worth the money. Having them look over your tax returns can save you money in tax breaks you don’t know about and give you peace of mind that your returns are done ontime and by a professional. An accountant can also prepare the financial statements you need to help your business grow.
In the meantime, take a look at these common accounting mistakes small business owners make so that you can avoid making them yourself.
Unorganized Paperwork
The success of every business depends on its financial health. Your business’s financial health depends on having accurate records. Not to mention that failing to maintain adequate records is an offence under Canada’s Income Tax Act. While chances are that you won’t end up in jail for not keeping accurate financial records, once you come to the CRA’s attention, you can expect more scrutiny from them going forward.
Not keeping receipts for all expenditures, not recording petty cash expenses accurately on the day that they’re incurred, not putting money aside for taxes and GST/HST remittance, not having a separate account for GST/HST remittance and mixing personal and business finances are common documentation mistakes small business owners make.
Putting Off Your Bookkeeping Until the Last Minute
Not doing the books regularly is also a common mistake, and the repercussions can be fatal to a small business.
Because small business owners have so many things to take care of, many will put off doing the books until the end of the week or monthor longer. This is a risky thing to do because your business depends on maintaining the proper flow of cash going in and out for its survival. Not paying your bills and taxes on time can cost your business more money, as can not finding mistakes on your bills or invoices in a timely manner. And, of course, not staying on top of your accounts receivable jeopardizes the lifeblood of your business.
These are just a few of the reasons why bookkeeping needs to be done every day. Also, it’s a lot easier to stay up-to-date on your books than it is to catch up on your bookkeeping.
Not Knowing Where Your Business Stands Financially
Whether you own a restaurant, a hair salon or a personal training service, knowing how your business is performing financially and how it can improve are crucial to its success.
It can be difficult finding the time to take a step back and look at your finances from different perspectives, but it’s the only way to know which financial decisions are the right ones for your business. It’s also crucial to know that you always have enough money in your account to keep your business operating and that your business isn’t wasting money by finding financial inefficiencies. This is why businesses frequently prepare financial statements like balance sheets, income statements, and cash flow statements.