Common Bookkeeping Mistakes Small Businesses Should Avoid
For small businesses, well-organized bookkeeping is vital. Not only is important for internal records and tracking business success, improper records and books are some of the main triggers that could get you audited by CRA. To keep your business on track and help you avoid an audit by the CRA, we have compiled a list of common bookkeeping mistakes.
Including 100% of the GST paid on meal: Most business owners include 100% of the GST paid on meals on their GST return when actually only 50% of the GST can be claimed as GST paid on purchases. To make the calculation easy, you can add a sales tax line in your accounting software for all meals with a rate of 2.5%.
Using your personal bank and credit card accounts for business: By using your personal accounts, you are making it more complicated. If CRA is doing an audit, it will ask for your bank statements and might reject some expenses. You can have a business bank account and credit card accounts which will make it easier for you or your bookkeeper to enter expenses and reconcile the accounts. However, it will be problematic the other way around also, when you are using your business account for personal expenses. To keep your bookkeeper’s cost down, use only your business account for business expenses, but if you have to use it, highlight what is personal.
Not taking stat pay into account while deciding payroll: Stat pay is mandatory if an employee has worked for fifteen days in the past thirty days prior the stat. Even if the stat falls on a day the employee isn't usually working, you have to pay for the stat based on average hours. Holiday pay is also mandatory at a minimum of four percent and you have the choice to accrue it or pay it on each cheque. Whereas paid sick days aren't mandatory.
Submitting credit card or bank statements for record keeping: Credit card or bank statements aren't proper documentation for CRA audits. Most of the time CRA refuses expenses which don't have corresponding receipts so you need to keep all your receipts.
In order to avoid these common mistakes in bookkeeping, reach out to Marie Fournier, an expert in bookkeeping and accounting services in Victoria, BC. To know more about Marie and her services, please click here.