Not keeping your receipts
They don’t have to be well organized but you need to have them. It can be as simple as stuffing them all in one place (an envelope, a drawer etc.) and you can also just take a picture. CRA is fine with a digital picture as long as the information is legible. There are numerous apps out there that you can download onto your phone and use to take a picture of the receipt. It then gets loaded into the cloud and can be connected to dropbox, box or most other cloud storage programs. Personally, I use hubdoc, it’s not fancy but it does the job I need.
Falling Behind on Record Keeping
It’s tough being a business owner, everyone wants your time and money. Accounting can easily be pushed to the back burner after a long week. The problem then becomes the work builds and at some point it needs to be dealt with. If you don’t you risk filing tax returns late or paying vendors late and then interest starts to accrue. If you are too busy to deal with it there are lots of programs to make the burden easier without having to hire outside help. If the business reaches a certain size you will need some kind of accounting support system.
Not Collecting From Customers Quick Enough
After you issue an invoice don’t be afraid to follow up with the customer and nudge them to pay up. Cash flow is the blood of your business and it needs to be constantly coming in. Sometimes the conversations with customers can be hard but they need to happen. Remember you are not a bank and you are in business to make a profit. If the customer stalls long enough have a conversation with a collection agency, they take a percentage of what they collect but are skilled at what they do. See my other blog post for ways to get customers to pay quickly.
Not Routinely Reconciling
Within accounting software you can enter any kind of expense or invoice you want. The problem is that sometimes you miss something, nobody is perfect, it happens. At the end of the month when you receive your bank or credit card statement this gives you the opportunity to reconcile your accounting software with what the bank has recorded. This gives you the opportunity to correct any mistakes before any taxes get filed or financial decisions are made. Without doing this step the little mistakes build and can be a serious problem.
View Accounting as a tool for growth
Accounting for me is fun and interesting but for most people it isn’t and that’s okay. Instead of viewing Accounting a chore and hassle look at it as an opportunity to grow your business. Once you (or your Accountant) are done reconciling the accounts you can see where your business is making money, losing money or ways to improve operations. Maybe there is an area where over time you are starting to spend too much money and you can dig in and find out why. Often I see businesses subcontract out work, at some point it may be more profitable to hire and do the work in house (for example a construction company will hire there own plumber). Sometimes the reverse is true, an excavation company may save money by closing their garage and getting a service plan from a dealer.
Hopefully this list will give you some ideas to improve your Accounting. If you have any questions don’t hesitate to call.
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