You’re likely not doing bookkeeping right. Here’s why.
Many people do their own bookkeeping, but few are doing it right. Below are some common bookkeeping bad habits we have seen from working with many business clients in Vancouver. If you need help on bookkeeping and want to save time and money, feel free to contact us.
You Manually Type-In Bank and Credit Card Transactions
Manually entering bank and credit card transactions is a very monotonous activity that is prone to errors. (Errors mean more time wasted on trying to reconcile accounts later on.) Nowadays, most accounting software should automatically download transactions from all your bank accounts and credit cards into your cash accounts. What’s left to do is classification of the transactions to the correct accounts and invoice.
You Use Excel or Google Spreadsheets as your Accounting Software
Using Excel or Google Spreadsheets to do your accounting is sufficient for an early business venture. As business picks up, transactions are more frequent and complex. You will need proper accounting software to help you keep your books in order.
You Use Pen and Paper to Do Bookkeeping
This one does not happen frequently anymore due to the prevalence of accounting software and spreadsheet software. But throughout our years at Moments, we have seen a few situations where business owners are still doing bookkeeping on paper, and in one case – ledger paper.
You “reconcile” the year-end cash balance with an adjustment entry to avoid cleaning up the transactions
Sometimes, the year end cash balance just would not tie, and you cannot figure out why after spending hours on it. Instead of finding the mistake, you just adjust the cash balance to tie to your bank account at year end by creating an adjustment entry straight to shareholder equity. This is also known as the plug. This fine if the difference is immaterial or not significant. However, if you find yourself doing this for larger dollar amounts, this is a sign that something is amiss and you should dig to the bottom of the issue instead of just plugging it. Often times, you will uncover some bookkeeping issue that you were not aware of earlier.
You procrastinate bookkeeping for so long that you missed the year-end tax reporting deadline for your corporation.
Bookkeeping is important because it forms the basis of your tax filings. So, it is not something that you can procrastinate on! In addition, you should do bookkeeping on a regular basis because it keeps your books up to date. It is often easier to record transaction when the facts are fresh off your mind and at your fingertips than to dig back files and emails from a year ago.
You lose track of how much time you spend on bookkeeping, completely dread it, but you are still doing it.
Just like any business activity, you should keep track on how much resources you are using to complete a task. We keep a budget of how much cash we spend every month. Time is a scarce resource, so you should have a general idea of how much time you are spending on various activities. Do you know how much time every month you spend on bookkeeping? Do you feel like you are spending too much time on it, but you want to just do it all yourself so you can “get it over with”? We understand habits of doing bookkeeping yourself is hard to break, even though you do not enjoy bookkeeping at all. Once you try out our bookkeeping service, you would likely never want to go back to doing bookkeeping yourself.
You are still reading this article, want help on bookkeeping, but have not spoken with us…
Okay! Good job for reading this far on an article on bookkeeping. We know bookkeeping is not the most entertaining read. If you are still reading and want help on bookkeeping, please contact us for a free, no obligation consultation today. We have served many businesses in Vancouver and the Lower Mainland. No, seriously! If you spent the time to read this far, just shoot us an email or give us a call.