Four Common Mistakes People Make When Doing Their Own Books
As an entrepreneur, you are almost certainly going to make at least one bookkeeping mistake. The good news is that bookkeeping errors can be easily corrected if they are caught early on. With a little effort and attention, you can ensure you save time and money when doing your books.
As experts in the field, Indie Bookkeeping has put together four of the most common mistakes people make when doing their own books, along with the best advice on how to avoid them. Keep reading to know more!
1. Mixing business and personal finances
Using your personal credit or debit card to make business transactions can make it difficult to identify and separate the two by the end of the financial year. If you are ever audited, it may also be challenging to prove that the purchases were made for business purposes. The easiest way to resolve this issue is to open another banking account entirely dedicated to business transactions.
2. Not retaining original receipts
Although you can provide proof of payment by using your credit card or bank account, these documents are not enough to show how much tax you may have paid (which means you cannot claim that amount back when you file your HST remittance). Oftentimes there is no indication on the statement about who you actually paid. For instance, if you send an EFT to a vendor to pay an invoice, your banking statement might imply that you transmitted the money by EFT without identifying the recipient. To avoid this, keep copies of all receipts related to your business. Receipts issued via email as PDF files can be saved to the computer and sent to the bookkeeper. For any paper receipts, it is recommended to take a photo of it on the phone and send that photo to the bookkeeper.
3. Paying in cash for a service without getting an invoice or receipt
This can be a nightmare for a bookkeeper as our job is to ensure your financial records are complete and accurate, and we can account for all of the transactions that took place for your business. When money leaves the company and we don’t have official records of where it went, your accountant and the CRA may look into the matter. It’s advisable always to obtain a receipt for any business-related purchases. It need not be fancy, but it must include the name of the person or company from whom you made the purchase, the date, the item you bought, and the total cost. Remember that you cannot claim a refund for HST if the receipt does not show that you paid it.
4. Not claiming household expenses when working from home
Now that more people are working from home, they are unaware of the possibilities that allow them to save on taxes. You can deduct a few domestic expenses from your taxes if you work from home full-time and have a space for your office. A bookkeeper may advise you on what you can deduct and can create a log for your accountant so they can include the costs on your return at the end of the tax year.
To avoid these and other mistakes, reach out to the experts at Indie Bookkeeping. We offer services like full-cycle bookkeeping, tax preparation, data entry, and financial analysis to clients across Ajax, Durham Region, GTA, 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.