Common Bookkeeping and Accounting Problems in Business

You’re an entrepreneur who wants to manage everything on your business plate, and be kick-ass while doing it. How many times have you felt that you’re spreading yourself too thin, or tackling tasks that take up masses of time and you are simply not good at all of them? Every day, right? I’m taking a bet that bookkeeping is one of these thorns in your side. Let’s look at common challenges and ways to take the pain away.

Top bookkeeping and accounting problems

  1. Transactions not entered into the books. Expense receipts are not entered, bank transactions are not explained. Solution: consider using Hubdoc, Receiptbank or Expensify to help capture the data.
  2. Bank accounts not reconciled. If your bank balance in your books doesn’t match your actual bank balance or not all the transactions are explained properly, then your books are a just a delightful work of fiction. Solution: set a practice of monthly reconciliations at least, use the bank feed integrations in Quickbooks or Xero, and set up some bookkeeping automations.
  3. Bookkeeping not up to date. Self explanatory, but unfortunately common. The longer you leave it, the harder it gets to find documentation or remember what an expense was for. Solution: hire a competent bookkeeper, set a monthly practice.
  4. Recording transactions to the wrong account. You have to decide whether a purchase is inventory or an expense, or perhaps you have to decide whether a consulting fee is part of your cost of goods sold or overhead. Solution: look at your P&L monthly and you’ll see inconsistencies, implement accounting policies and review process – get help from your accountant.
  5. Poorly designed chart of accounts. Perhaps you have too many accounts, too few, duplicates or nonsensical ones. If your chart of accounts doesn’t make sense, your bookkeepers will have difficulty recording transactions properly and your financial statements won’t be useful. Solution: get an accountant or FP&A specialist to redesign your chart of accounts.
  6. Improper treatment of sales taxes. All your products and services need to be set up in the books to record the right sales taxes, and the location of the buyer needs to be considered. All expenses need to have the sales taxes split out into the right accounts. Not using the built-in sales taxes functionality of the accounting software properly causes errors – this could cost your business tens of thousands of dollars of unexpected sales tax liabilities and penalties. Solution: get an accounting software implementation expert to set up your sales taxes, get an accountant to help you with your sales tax filings every time.

Avoiding DIY Bookkeeping

You’ve grown your small business to success through your ideas, strengths, and intellect. Not everyone can do this, so at least give yourself a pat on the back. While growing, you have to guard your time and focus on your team, business development, and day to day operations. I doubt you look forward to spending time on your books, and it probably gets pushed back as lower priority, or you avoid it because you haven’t found an easy and reliable way to get it done.

One of our clients, a media company, used to do bookkeeping on spreadsheets because they had limited skill and severe time constraints. See Stop Bookkeeping on Excel for why this isn’t an effective method.

The downside to their spreadsheet bookkeeping process is that it provided no real or current insights into the numbers that would affect their business. For example, it was impossible for our client to predict cash flow, or notice a downward trend happening. A cost-effective, small business bookkeeper would be able to head off disaster at the pass.

How to Find a Good Small Business Bookkeeper

If you are looking for a bookkeeper near you, keep the following key points in mind:

1. Make sure the chemistry is right

Research your bookkeeper first. There are many in Vancouver, Calgary, Toronto, Waterloo, Ottawa, or wherever you are in Canada. The good firms will be anxious to meet with you to find out if you are a good fit for each other. (This can be done effectively virtually, as we capably proved during the Covid-19 lockdown period). Get the team on a video call, talk to them, and make sure they show the same level of interest and intent for helping your business. Ask for reference points from companies that resemble yours.

2. Set out a plan

Take the time to get a proposal or scope of work covering everything you want done so you, your internal team and the bookkeeper are on the same page. A competent bookkeeper will ask to see your books or ask a lot of detailed questions before sending a formal proposal.

3. Shop around

Just because you feel a spark, doesn’t mean that you lock in your final answer. It’s smart to inquire into multiple firms. Entreflow offers bookkeeping and accounting services in Toronto, we also have bookkeepers and accountants in Vancouver and we have good relationships with accounting firms across Canada since we offer training courses for other CPA firms. So we’ve asked around and we’re familiar with what other firms offer. Some may be able to offer lower rates, some offer more services, some specialize in your industry, and some may align better with your values and culture.

4. Ask around – referrals from a trusted source

While you are window shopping, naturally you will want to talk to other small business owners. Chances are they’ve faced, or are facing, the same hurdles and growing pains as you are. Referrals are one of the strongest tools you can leverage. The true test of the value you will get from a local bookkeeping partner is the outcome of their services, and the strength of their ongoing relationships with their busy clients. Ask another entrepreneur what they think.

5. Consider the accounting software needs

In the preliminary stages, find out if they are certified in the software you use or want to use, and ask what guidance they may have for you within your budget. If you are on that subject with them, you can also see if they have suggestions on upgrades, but we’ll expand on that later on in this post. At minimum, they should be certified as a Quickbooks Proadvisor or Xero Partner, and routinely use connected apps like hubdoc and expensify to help collect your documentation.

Bookkeeping and Cash Flow

It’s crucial for a small or starting business to keep a watchful eye on cash flow. Keeping the books up to date and accurate will help owners forecast cash needs and help owners make more informed decisions. But a bookkeeper is not the best person to help you forecast and manage your cash flows. These decisions include:

  • Capital purchases
  • Payroll
  • Pricing
  • Budgeting
  • Big purchase planning

Cash Flow happens to be one of our favourite topics at Entreflow. For more information, we’ve got articles about cash flow statements and cash flow forecasting, a cash flow webinar with downloadable slides, plus a free cash flow tool designed by the Entreflow team.

Small Business Bookkeeping Consultants and Corporate Taxes

Bookkeepers can help speed up the year end reporting and tax filing process. Having everything closed and reconciled at the year end will save your tax accounting prep time, which could help lower year end costs. Most of the time, when a bookkeeping firm receives a new client just before the year end tax deadline, there is a pile of catchup work to be done. This then causes a panic for the bookkeeper to get it done on time and within budget. All while keeping their fingers crossed that there aren’t any hiccups to slow them down.

If you are in need of business tax help or filing, feel free to reach out to us. We’ve got a great, in-house tax accountant ready to help you.

Updating Your Small Business Bookkeeping Software

We are in the age of some amazing business software. If you have a problem, there is an automated solution. Bookkeepers can help highlight the gaps in your systems and implement operational apps to help with running the business. The most common switch made by small businesses is going from desktop based accounting software to Quickbooks Online or Xero. This upgrade allows for more efficient bookkeeping and data management. We can help with Quickbooks or Xero accounting software setup.

If you are thinking you need a bigger overhaul, you may want to look into a small business ERP software implementation. We can help create the network of apps that will make your old systems seem like a dusty donkey compared to a sleek racehorse.

Go Beyond Bookkeeping and Accounting: CFO Services

Don’t just look for someone to keep your books clean. Look for a finance professional who can teach you something. A seasoned professional can act as your fractional CFO services on an interim basis to help keep you organized, show you opportunities to improve your business, and catalyze growth.

Our goal is to get business owners properly standing on their feet when it comes to business operations. We want to see everyone succeed. If that means you need to have someone come in, clean up, and show you a more efficient way of doing it, then it’s worth the investment. Ask us how.

Helina Patience, CPA, CMA
Author: Helina Patience, Founder, CPA, CMA, BA (Hons), BEd

Helina is a CPA, CMA with over fifteen years of experience in finance & HR within multinational companies, across many industries. Also the CEO of entreflow consulting group where I help small to medium-sized businesses get organized, grow, and crush their goals. I hold vast global experience after living and working in Australia, India, the UK and Ireland. Connect on LinkedIn.

Get access to our hottest business-scaling tips, tools and resources.

  • This field is for validation purposes and should be left unchanged.

Gain access to HR, Finance/Accounting and Systems secrets from a team that has helped hundreds of companies grow up.