Record keeping (also known as bookkeeping) is no one’s favourite task. However, the reality is if you own a small business, good record keeping is vital. Many start-ups, as well as existing business owners tend to neglect this aspect of their business until the end of financial year (EOFY) is upon them. By law, every business is required to maintain accurate and timely records.
Enough emphasis cannot be placed on how important it is to organize your accounts from the onset by setting up and using one of the industry leading accounting software that suits your business needs.
Here are 7 simple tips to make record keeping easier and less stressful during you Financial Year:
1. Have a business bank account for business income and expenses
Keeping your business activity separate from your personal is smart business. Open a Business account to account for your business activity. If you have a lot of foreign transactions open up a foreign business account with same terms.
2. Avoid cash
Instead, use your debit or credit card religiously. When you use cash you lose track of potential write-offs. If you have to pull money out of an ATM, note on the receipt the purpose of the withdrawal.
3. Devote time each week to take care of your books
Take time each week to review and manage accounts receivable and payables. Regular reviews will let you know how your business is going and allow you to control cash flow.
4. Get accounting software that suits your business needs
If you are unsure which software to select, you may contact a business consultant or accountant that can better advise you before you buy. We prefer to use QuickBooks for Small Business Solution. QuickBooks is an industry leading small business accounting solution, which is well received by the small business community. It comes in a few versions, notably the online and desktop to match your business needs. One key benefit is that you can access your financials anywhere, anytime or have your bookkeeper or accountant check information for you.
Your files will always be backed up regularly in the cloud. However, always ensure you keep backups of your financial data as an added security measure. With desktop software, you will have to get into a habit of regularly backing up your files.
5. Stay on top of your tax and compliance obligations
Meeting your tax and regular filing requirements can keep your business under the radar. If your business is turning over more than $30,000 it is required that you apply for a GST/HST account and start reporting the tax. You must also keep receipts for all acquisitions in order to support the claim on your expenses. If you employ staff, you must also register for a payroll account and start submitting withholding tax.
Based on your income your company may be obligated to either file GST/HST report on a monthly or quarterly basis with CRA. With the appropriate accounting program and setup, you can have this information at your fingertips. This way you create systems to help you streamline and automate your business processes for you to stay compliant.
6. Keep your receipts
As a general rule the CRA requires you to keep records for a minimum of 6 years.
The type records you are required to keep and have accessible upon request are:
- Invoices and receipts you provide for sales or services rendered by your business.
- Invoices for goods, services or other business acquisitions purchased for your business.
- Records of payments made to employees plus payroll source deductions submitted on their behalf.
- GST/HST supporting information
- Bank accounts and credit card statements
- All financial statements including profit and loss statement and balance sheet.
- Business Tax Return information.
- Records of stock purchases at end of financial year and asset register etc.
- Anything else with a monetary value to the business
Storing the files on your computer in logical directories is a good way to keep this information, as well as maintaining a well organised filing cabinet.
7. Get a great bookkeeper
As you expand your business you may need to engage the assistance of a great bookkeeper. And why would you consider this alternative? Firstly, it’s a tax deductible service, secondly hiring a bookkeeper helps you focus on growing your business while ensuring your record keeping is up to date.
It’s a healthy practice to meet all your tax and compliance obligations. It’s never too late, start now and take control of your business.
The information above is of a general nature and is non-exhaustive. Each small business circumstance will vary. Please contact an accounting professional regarding your specific needs.