Bookkeeping is a double-edged sword for companies. Plus, it is the basis of the accounting and finance system. You cannot determine the true financial position of your company without proper bookkeeping records. Some business owners don’t consider bookkeeping in Toronto an important activity. Consequently, they ignore bookkeeping mistakes and face the consequences. Nonetheless, they should change their perception of bookkeeping because it is what determines where a business stands. Here are mistakes to avoid for business owners with bookkeeping to make the most out of their bookkeeping activity:
At times, a bookkeeper may forget to enter the dual entry of each expense or income. It is crucial to ensure your final balance sheet depicts an equal amount on both sides. If you don’t make a double-entry of all expenses and income, you will face the issue of account imbalance.
Similarly, a bookkeeper may add the entry into the wrong account head. A bookkeeper may add home rent to your office rent account. However, you would have drawn rent money from your capital account. Hence, it is essential to keep your personal and professional accounts separate to avoid account imbalance blunders.
Not Upgrading Bookkeeping Software:
Today, traditional bookkeeping has become outdated because of the advancements. Business owners rely on virtual bookkeeping for efficient management of bookkeeping tasks. Nevertheless, some business owners don’t prefer upgrading their bookkeeping software because of the expenses or cost of training. As a result, they face problems with bookkeeping, such as low productivity and lots of errors.
Business owners need to upgrade their bookkeeping software for enhanced productivity and error handling. You can outsource bookkeeping in Toronto from a professional accounting firm if you lack the resources to upgrade for bookkeeping.
Not Hiring the Right Person:
Many companies think that bookkeeping is simply a recording process. Thus, they don’t consider hiring experts to handle bookkeeping for their business. However, it is a mistake because professionals are bookkeeping experts and manage bookkeeping faster and without making errors.
Not Performing a Check on Expenditure:
Creating a bank reconciliation statement is one of the components of a bookkeeping process. You may enter your vendor expenditure under your expense without confirming if the vendor has deployed the amount. Consequently, you can expect to bear an additional expense unless you check the date of use and rectify it. Hence, it is important to always perform a check on your bookkeeping records for effective bookkeeping.
Overlooking Creating Data Backup:
This is an era of digitization. It is also the reason why businesses at times suffer an issue of data loss. You can encounter the same issue because of a virus, data theft, etc. Therefore, it is important to have a backup of your bookkeeping data on another system or cloud for data security. Business owners in the past have suffered the problem of data loss, and ignorants are facing it today, too. Therefore, you cannot ignore creating a backup of your bookkeeping data.
Not Tracking Petty Cash:
Some business owners operate with a small amount of trivial cash. Yet, they don’t have any knowledge of how to track such cash. Hence, businesses need to set up a petty cash account for bookkeeping differently to track it conveniently.
Ignorant to Tax Guidelines:
At times, business owners who manage bookkeeping themselves with their management miss out on tax terms. As a result, they face tax penalties or punishments because they ignore following tax guidelines. Bookkeeping is very much part of a taxation process; therefore, businesses should not remain ignorant of tax guidelines.
Bookkeeping is a double-edged sword for businesses. Therefore, companies need to manage bookkeeping for their business efficiently and without errors. Plus, proper bookkeeping records aid businesses in determining their true financial position. Here are seven mistakes you must avoid with bookkeeping in Toronto for the preceding reason:
- Not making double entries for each income or expense.
- Deciding not to upgrade your bookkeeping software.
- Not appointing the right person for bookkeeping.
- Ignoring to perform a check on expenditure.
- Overlooking to creating a backup for your bookkeeping data.
- Not tracking petty cash.
- Not considering the tax guidelines for bookkeeping.
Lastly, business owners should outsource bookkeeping services from a professional accounting firm to avoid bookkeeping mistakes.
Author Bio:-Sohail Afzal is a CMA (Certified Management Accountant) and the Founding Partner of a professional accounting firm, GTA Accounting. He understands the needs of small-scale businesses & corporations and offers them tax advice to overcome their tax burdens. He is a professional author who often writes articles related to accounting.