Many small business owners decide to handle their bookkeeping on their own. After all, how difficult can it be? You record the credits and debits and keep track of ins and outs.
As most small business owners often discover, managing the books is often more complicated than they initially assume it’s going to be. While you may have the basics down pat, it might be more difficult than you initially thought. Here are some of the most common mistakes people make when they manage their books on their own.
1. Overlooking Tax Credits
This is perhaps one of the most common bookkeeping mistakes, and it’s one that can add up. Many staffing agency owners like yourself overlook tax credits they may be eligible to claim.
This is usually because the person doing the bookkeeping isn’t aware of the credit. It’s very difficult to claim a credit you don’t know exists. This could mean you end up paying more in taxes than you should or need to.
How can you make sure you’re taking advantage of all the tax credits you’re entitled to? One way would be to study up on the tax regime in the province you operate in. Another way is to hire a knowledgeable bookkeeper or third-party firm to assist you.
2. Not Leaving Enough Time
Running a staffing firm is no small task, and you probably find yourself wearing many different hats. Your to-do list is almost never empty, and many tasks get carried over day after day, week after week.
You’re often pressed for time, and bookkeeping is one thing that seems like it can easily be left for tomorrow. When you do sit down to look after the books, you find yourself in deep. Straightening everything out takes more time than you thought it would.
You end up missing deadlines because you just couldn’t get to the accounting in time or you thought it would take less time than it did.
3. Incorrectly Categorizing Expenses
You’re inputting your expenses, but you’re not putting them into the correct categories. This may not seem like a huge issue, but it could cause problems later down the line. How?
Incorrectly categorized expenses could mean you don’t meet the requirements for certain tax credits or that you do claim a credit you shouldn’t be eligible for. Another issue could be within your own budgeting, as you begin to incorrectly allocate expenses or try to pare back budget items.
Incorrectly categorized expenses may not seem like they could cause much trouble, but they could result in penalties from the CRA or even an audit. A bookkeeper could help you avoid these outcomes.
4. Mixing Business and Personal Spending
This is a problem many small business owners eventually run into. They use business funds for their personal spending, or try to justify personal purchases as a business expense. At first, this may not seem like a big deal. Unfortunately, it can cause big problems, especially if the CRA decides to audit your books.
Mixing business and pleasure isn’t a recommended course of action, and it’s certainly not a good plan for your finances. Keep everything on the straight and narrow by correctly separating business expenses and personal expenses. There are several ways to do this, including using a small business account. A bookkeeper can also help keep you on the right track.
There are many other errors staffing agency owners often make when they manage their bookkeeping themselves. Let the experts help you and avoid some of these mistakes.