The 5 Worst Accounting Mistakes a Business Can Make

A small business has enough challenges without throwing accounting issues into the mix. We’ve seen enough accounting mistakes in small businesses to put together this list of the worst of them, to hopefully steer you in the right direction when it comes to your small business.   Keep reading for the five worst accounting mistakes a business can make and exactly how to avoid them.      

1. Not Separating Business From Personal Accounts

  When you’re just starting out with your business, it’s usually easy enough to not separate your business and personal bank accounts/cards. That’s because you probably have few transactions and can easily identify which is which.   But once you start scaling, this is going to create a major problem for you and make tax season a nightmare. Not to mention, you could run the risk of attributing a personal expense to a business expense, which could be an issue if you get audited.   Start off on the right foot by separating your business and personal accounts to make tax season a breeze and to avoid any misuse of your business funds.  

2. Not Updating Your Books

  This might arguably be one of the worst accounting mistakes a business can make. Falling behind on the books can happen, especially for a growing business, but it’s easy to let it spiral out of control. And when you don’t have up-to-date books, you don’t have a clear picture of what’s going on with your business and you can’t make sound decisions.   Make staying up to date on your books a top priority for your business, and outsource it if it’s not getting done.      

3. Not Getting Paid on Time

  When growing your business, it can often feel more important to preserve your budding client relationships than potentially lose a client over a delayed payment. But the consequences of unpaid invoices to your small business are significant: it can mean you struggle to pay your employees and vendors and risk your business going belly up.   It’s not always easy to follow up on invoices, but a simple bookkeeping solution can help automate this process and get you paid faster. On the flip side, do your absolute best to pay your own invoices on time; being lax with your payments will damage your supplier relationships and could leave you in the lurch on your next big project.  

4. Not Backing Up Your Data

  The temptation to go fully digital is strong. In this day and age, paper receipts and files make for unsightly clutter that’s more likely to get lost than be of use. While going digital is all well and good, it’s absolutely critical that you keep a backup of your data.   If the device on which you store your business’ financial information is stolen, lost or hacked, you could lose years of important information about your business. Not to mention, should you be audited by the CRA, you could land yourself in hot water by not having a backup. Play it safe and back up your business’ financial data in a separate location (and be sure to keep it updated!).  

5. Doing Your Taxes/Accounting Yourself 

  As a small business owner, the DIY mentality is probably deeply ingrained. And while you’re the expert on your business, some things are better left to the pros, like contracting and accounting. By doing all of your taxes and accounting yourself, you’re leaving yourself exposed to risk, likely leaving money on the table, and burdening yourself with a complex tax that’s better outsourced.   Getting yourself an accountant is well worth the cost: it’ll save you countless headaches and hours and will likely end up saving you money in the long run.       Avoid Common Small Business Accounting Mistakes from the Start   Whether you’re just starting out or you’re ready to take your business to the next step, it’s never too late to think about your process and how to make it better. These common accounting mistakes for small businesses should serve as a guide for what not to do (and what to do instead), so that your business starts out on the right foot or pivots accordingly if you’re veering down the wrong path.   Let us help take your business to the next level with expert advice and guidance. You don’t have to do it all on your own: our small business accounting expertise takes a weight off your shoulders and lets you get back to doing what matters: running your business.     Contact us today to see how we can help.