Bookkeeping may seem like just data entry — until it isn’t. Whether you’re a freelancer, incorporated professional, or running a growing small business, bad bookkeeping habits can cost you thousands in lost deductions, penalties, or audit stress.
With tighter CRA scrutiny, digitization, and compliance expectations, getting your books right is more important than ever.
In this article, we’ll break down the 10 most common bookkeeping mistakes small business owners make — and show you how to avoid each one with simple, clear fixes.
🗒️ Key Takeaways
- Bookkeeping errors are common and costly, especially around GST/HST and expense tracking.
- The CRA expects audit-ready records, even for sole proprietors.
- Many mistakes happen when business owners try to “wing it” or wait until year-end.
- Good habits and the right support can prevent penalties, missed write-offs, and tax stress.
🚫 1. Mixing Personal and Business Expenses
Problem:
Using the same debit or credit card for business and personal purchases.
Why it’s risky:
- Confuses your records
- CRA may disallow deductions
- Harder to track profitability
- Wastes time during tax prep
✅ Fix it:
- Open a dedicated business bank account
- Use a separate card for business spending
- Reimburse personal expenses properly (don’t “wing it”)
📥 2. Not Keeping Receipts or Documentation
Problem:
Tossing receipts or assuming bank statements are enough.
CRA rules:
- You must keep original documents (digital or paper) for 6 years
- Missing backup? The CRA may disallow the deduction
✅ Fix it:
- Use apps like Dext, Hubdoc, or QuickBooks to capture receipts
- Label everything with who, what, and why
- Scan paper receipts right away
💰 3. Failing to Track GST/HST Properly
Problem:
- Forgetting to track HST collected
- Not separating GST/HST from sales
- Miscalculating input tax credits (ITCs)
Why it matters:
Incorrect tracking leads to:
- Reassessments
- Missed credits
- Penalties or interest
✅ Fix it:
- Use accounting software with tax tracking
- Reconcile HST monthly
- File on time (annually, quarterly, or monthly, depending on your status)
🔄 4. Ignoring Bank Reconciliations
Problem:
Not comparing bookkeeping records to your bank statements.
Why it’s risky:
- Undetected errors
- Duplicate or missed transactions
- Fraud or fees go unnoticed
✅ Fix it:
- Reconcile monthly
- Use cloud software like QuickBooks or Xero that imports transactions automatically
❗ 5. DIY Bookkeeping Without Understanding the Basics
Problem:
Jumping into bookkeeping without understanding journal entries, chart of accounts, or CRA compliance.
What could go wrong:
- Incorrect expense categorization
- Overstated/understated income
- Stress at year-end or audit time
✅ Fix it:
- Take a bookkeeping basics course
- Start with software that offers support
- Know your limits — outsource when needed
🕒 6. Waiting Until Tax Season to Organize Books
Problem:
Doing 12 months of bookkeeping in one stressful weekend.
Why it’s inefficient:
- You forget transactions
- Miss deductions
- Scramble for receipts
- Risk of filing late
✅ Fix it:
- Do monthly or weekly check-ins
- Automate wherever possible
- Hire a bookkeeper in Toronto to manage things year-round
🧾 7. Categorizing Expenses Incorrectly
Problem:
Lumping all expenses into “Miscellaneous” or using the wrong tax categories.
Why it matters:
- Missed tax deductions
- Can trigger CRA questions or audits
- Skews your financial reports
✅ Fix it:
- Use CRA-compliant expense categories (meals, travel, supplies, etc.)
- Don’t guess — ask a pro or use accounting software with smart categorization
🧾 8. Forgetting to Invoice or Follow Up on Payments
Problem:
Not sending invoices promptly or chasing unpaid ones.
Result:
- Missed revenue
- Cash flow issues
- Time lost chasing money
✅ Fix it:
- Set reminders to send and follow up on invoices
- Use automated invoicing tools like Xero or QuickBooks
- Consider payment terms: Net 15, Net 30
🛑 9. Not Backing Up Digital Records
Problem:
Relying on one device or platform to store your financial records.
What could go wrong:
- Hardware failure
- Lost phone or corrupted file
- CRA audit request = panic
✅ Fix it:
- Use cloud accounting tools with automatic backups
- Store backups in multiple secure locations
- Set a reminder to review storage monthly
🤝 10. Not Getting Professional Help When Needed
Problem:
Trying to save money by skipping help — and paying more later in taxes, errors, or missed credits.
Why it backfires:
- Increased audit risk
- Missed deductions (often in the thousands)
- Stress and wasted time
✅ Fix it:
- Have a pro review your books quarterly or annually
- Outsource monthly bookkeeping services Scarborough if your volume is growing
- Remember: their fee is often less than the tax you’ll overpay without them
❓ FAQ
1. What’s the #1 bookkeeping mistake small businesses make?
Mixing personal and business expenses. It creates audit risk and messy records.
2. What bookkeeping records does the CRA expect?
All income, expense, and tax documents — invoices, receipts, bank statements, payroll records, and more — are stored for at least 6 years.
3. Can I automate my bookkeeping?
Yes — cloud software like QuickBooks Online and Xero can automate 80–90% of your work if set up properly.
4. Do I need a bookkeeper and an accountant?
Often, yes. The bookkeeper handles day-to-day records, and the accountant prepares tax filings and strategic planning.
5. How can I tell if my books are a mess?
Red flags include: inconsistent income reports, unreconciled bank statements, late filings, and stress every time CRA comes to mind.
🔚 Final Words & Next Steps
Bookkeeping mistakes are common — but they’re also preventable.
If you’ve made some of these errors, you’re not alone. The good news? With a few simple changes (and the right support from a small business bookkeeper Toronto), you can protect your business, maximize your deductions, and run with confidence.
👉 Ready to fix your books or start fresh?
Our team helps small business owners clean up past records, build better systems, and stay CRA-compliant — without the overwhelm.
🔗 Book your free consultation with us today! No pressure. No judgment. Just clarity.
Read about our small business bookkeeping services.
Disclaimer
The information provided in this blog is for general informational purposes only and does not constitute professional accounting, tax, financial, or legal advice. While we strive to ensure the accuracy and timeliness of the content, the information may not apply to your specific situation or reflect the most current legislative changes. Readers are strongly advised to consult a qualified professional before making any decisions based on the content of this blog. MAQ CPA and its representatives disclaim any liability for any loss or damage incurred as a result of reliance on any information provided herein.