Bookkeeping mistakes are terrible news for a small business. There are some mistakes that you can afford. And some mistakes can cost your business. These mistakes are called deadly mistakes. If you want to run a successful small business, you may want to make your bookkeeping as accurate as possible.
To make the bookkeeping accurate, you need to know about these deadly bookkeeping mistakes. If you can avoid them, I would say you would be successful as a businessman.
Error in Payroll Reporting
The bookkeeper has to know to enter the data correctly. Incorrect data entry could create mistakes in the payroll system. Many untrained people may enter the data to gross wages to the net paid out instead of on the income statement.
Fixed assets need to be adequately recorded. Depreciation only gets right if the asset has been expensed correctly.
Lack of Proper Reconciliation
Improper reconciliation means you don’t have a proper account for your business activity. It’s not good news for the business. This way, you can make sure that you have not overstated or understated your income or expenses. Inaccurate financial statements can be very problematic for future business.
Not Hiring Trained Bookkeepers
Bookkeeping is not as complicated as accounting. So, businessmen often try to hire untrained people to lower the cost. It works almost fine. But sometimes novice bookkeepers fail to understand the importance of entry. They may not fully comprehend the necessity of prior year adjustment. If it remains unchecked, it could create serious tax problems in the future. These problems are very hard to fix for every provider of accounting service in Toronto.
So, you have to find a cost-effective and accurate way to do your bookkeeping. I think outsourcing could be an excellent idea for you.
Income Reporting Error
This is not good news for a small business owner. Under-reporting or over-reporting income could be a very fatal mistake. Think about it like this. If you don’t have the correct data of your income, you can’t access the exact profit and loss of your business. You can’t have a concrete plan without a solid knowledge of your income.
Misreporting the expanses could break the backbone of your business. So, you need to be extra careful about this.
Lacking a CPA in Place
Your bookkeeper should have an idea of day to day accounting. As they are not accounting experts, a CPA needs to communicate with the bookkeeper and make sure that everything is alright. The CPA needs to go through your financial record too to ensure that everything matches your tax return.
Using Bad Bookkeeping Software is a big no for every accounting service in Toronto
The most popular bookkeeping software is spreadsheets. Though it works fine, it may not give proper support if the company keeps growing. In those cases, you have to use more complicated software. Sticking to the old software could be very problematic.
Not Using Check and Balance
You have to be careful about bookkeeping theft. The only way to prevent this thing from happening is to initialize proper checks and balances into your bookkeeping system. A few things should be off-limits to bookkeepers like- not giving authorization of signing any check, using only hand cash or online bill pay.
The Bottom Line
These bookkeeping mistakes are deadly and can ruin your business. But with a little extra care, you can avoid these bookkeeping mistakes very quickly. Besides taking these mistakes seriously, you should also consult with a financial advisor about it.
If you consider a cost-effective, on-time, mistake-free bookkeeping or accounting service in Toronto, feel free to contact us.