It’s not that you’re incapable of bookkeeping – anyone can learn it with enough time and effort. It’s that you don’t know what questions to ask. You’re probably doing what makes sense to you and, unfortunately, that doesn’t always jive with what makes sense to the CRA.
Quickbooks Online is quickly becoming a very popular product among entrepreneurs who want to do their own bookkeeping. It’s affordable and it’s designed to be used by people who are not bookkeepers. It tries to make everything straight forward and intuitive – as easy and stress-free as possible – which is what everyone wants when dealing with their books.
But therein lies the danger, nay, the peril.
It lures you in with promises of ease and then it sucks you down the rabbit hole and before you know it you have 3 bank accounts showing, one with a negative balance of $10,000 (even though your bank account is actually positive $15,000), 5 income accounts with no knowledge or understanding of what amounts are going in which account, and $12,000 in Uncategorized Expenses.
I recently took on a new client who was using QBO. They entered all of their 2019 and asked me to do January 2020 forward. Great! Super excited. Love bringing on a new client! But then I started poking around a bit. I asked a few questions. Then a few more. Then we were on the phone going through everything and before we knew it, there was at least 6 hours of clean up for me to do before I could even start January.
This is why I say you don’t know what you don’t know. Just because all of your business transactions have a home, doesn’t mean they’re in the correct home. And when your accountant goes to do your year end, you don’t want them to be the ones fixing things. I promise you it’ll cost at least double what you would pay a bookkeeper.
A few tips for those who need to keep doing their bookkeeping on your own, whether it be because you can’t yet afford a bookkeeper or because your control-freak, entrepreneurial heart isn’t ready to delegate the task 😉
- Consistency is key – if you expense your Canva monthly subscription to Advertising the first month, keep putting it there. Don’t switch it to Dues and Subscriptions for months 3 and 4, then back to Advertising month 5. Once an advertising expense, always an advertising expense.
- Uncategorized anything is not your friend. Uncategorized income and/or expense accounts serve their purpose but try to avoid using them. Especially try to avoid using them as a catch-all for when you don’t know where to put stuff. Take a minute, ask Google, and then decide where to put that income or expense.
- If you pay an expense from your personal account, credit your Owner’s Investment/Withdrawal account (or Shareholder’s Loan account for incorporated entities), not the business bank account – because even though it’s a business expense, the money didn’t come from the bank account, did it? You won’t be able to reconcile the account if you do this.
- Reconcile your business bank and/or credit cards MONTHLY (please? For me?)
I hear from a lot of new clients that they were worried for someone else to see their books, fearing judgement. But guys, we’re all entrepreneurs here. We’ve probably all told someone else at some point that they don’t have to be perfect at every aspect of their business; they can’t know everything. So then why do we expect that of ourselves?