Most bookkeeping problems don't come from fraud or complicated transactions. They come from small habits that pile up until tax time, a CRA letter, or a loan application exposes them. Here are the mistakes we see most often with Ontario sole proprietors and small corporations, and how to fix each one.
1. Mixing personal and business money
Paying a personal bill from the business account, or buying supplies on your personal card, isn't illegal. But it makes your books harder to trust and your expenses harder to prove.
Fix it: open a separate business bank account and use one card for business purchases. If a personal expense slips through, record it as a draw (for a sole proprietor) or a shareholder loan entry (for a corporation), not as a business expense.
2. Not reconciling your accounts
If you don't match your books to your bank and credit card statements, errors go unnoticed: duplicate entries, missed deposits, unrecorded bank fees, payments recorded twice.
Fix it: reconcile every bank and credit card account monthly. It's the single best habit for clean books.
3. Missing or thin receipts
The CRA requires you to keep records that support your income and expenses, and to keep them for six years from the end of the last tax year they relate to. A line on a bank statement often isn't enough to support a deduction on its own.
Fix it: keep the actual receipt or invoice. Digital copies are fine if they're legible and complete. Take a photo when you pay and file it the same week.
4. Claiming HST input tax credits without the right details
To claim input tax credits (ITCs) for HST you paid, you need supporting documents that show specific information, and what's required depends on the size of the purchase. For purchases of $100 or more, for example, you generally need the supplier's GST/HST registration number.
Fix it: check that larger invoices show the supplier's business name and GST/HST number. Ask for a proper invoice when a receipt is missing details.
5. Putting transactions in the wrong categories
Lumping everything into a miscellaneous account, or mixing capital purchases with everyday expenses, leads to wrong financial statements and missed or incorrect deductions. A $4,000 laptop, for example, is generally a capital asset written off through capital cost allowance, not an office supply.
Fix it: set up a chart of accounts that matches how you file. The expense categories on Form T2125 work well for sole proprietors. Then categorize consistently.
6. Missing payroll and HST deadlines
Source deductions you withhold from employees and HST you collect from customers aren't your money. They're held in trust for the government, and late remittances bring penalties and interest.
Fix it: put every remittance and filing deadline on a calendar. Most HST registrants have to file electronically, and most employers remit payroll deductions by the 15th of the following month.
7. Letting it pile up until tax season
Catching up a year of bookkeeping in April is stressful, expensive, and error-prone. It also means you spent the year making decisions without real numbers.
Fix it: do a little every week or month. If you're already behind, don't panic. A structured catch-up gets you current, and you can build a routine from there.
The payoff
Clean books do more than keep the CRA happy. They show you which clients and services actually make money, make loan and lease applications easier, and lower your accountant's bill.
Sources
- Keeping records, Canada Revenue Agency
- Input tax credits, Canada Revenue Agency
- Remitting source deductions, Canada Revenue Agency
- How to file a GST/HST return, Canada Revenue Agency
- T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income, Canada Revenue Agency
Behind on your books? Our catch-up bookkeeping service gets you current, and monthly bookkeeping keeps you there. You can also grab our free bookkeeping checklist.