Bookkeeping System Considerations

5 KEY THINGS EVERY NEW CANADIAN SMALL BUSINESS OWNER SHOULD KNOW ABOUT ACCOUNTING & TAX

Now that you know how important it is to stay up to date with tax laws and regulations, the next most important thing is a good Bookkeeping System.

Keeping accurate financial records is crucial for understanding the financial health of your business and for tax purposes. Detailed records of all business transactions including receipts, invoices and bank/credit card statements should be kept and will be essential proof when CRA chooses to review/audit.

When it comes to bookkeeping, our motto is SOS.

• Keep It Simple. Whatever you do, it does not need to be complicated. Our preference is QuickBooks Online (QBO) with a clean and simple set of accounts to use. The categories should be generic and not specific to who you buy from but rather the type of expense. For example, office supplies would be an expense account including purchases from Staples and Office Depot. Same with accountants, bookkeepers, and lawyers’ expenses, you might want those under the same professional fees expense account. If you want to see how much you spend on each, with QBO, you can pull up a report and organize it by vendor to show this information easily.
  Also, in keeping it simple, the frequency of your GST filing should be considered. As a small business, reducing unnecessary red tape gives you more time to run and grow your business so filing once a year is often adequate. You can/will be required to make instalment payments throughout the year, but the actual filing can be done once a year. When your revenue reaches a certain level, you will have to file more often but no need to add that extra layer until it is mandatory.
• Keep It Organized. Having a filing system to keep everything organized is important as you will need to refer to these documents at various times, especially when it comes to taxes. I prefer to organize for the fiscal/tax year by expense category (i.e. office supplies, meals & entertainment, etc.) however some prefer to organize by month. Either way, choose what works for you and stick to it. If you are paperless like our office, you can also email the receipts to your QBO, match to the transaction and have on record for future reference.
• Keep It Separate. Your business should always have its own bank accounts and credit cards which should be used for business transactions only. All personal expenses should be paid for through your personal accounts. Keeping them separate will not only make it easier at tax time but also fewer transactions that you need to record in your bookkeeping as every transaction needs to be accounted for in your business accounts, even when not deductible.

Whether it be an Excel spreadsheet, an online provider like QuickBooks Online, or a templated checklist like we have designed, a bookkeeping system is incredibly important but also being consistent with it. The more accurate and timely the information, the more reliable the information will be for you to make management decisions throughout the year.

Three hot topics to come… 

***This blog is for information only and not to be used as tax advice or planning without first seeking professional advice. Information is subject to change without notice.