Bookkeeping is probably not your favourite task unless you are a bookkeeper or a fan of working with numbers. Adopting and practicing consistent good habits can help you avoid costly errors in your books. We’ve put together these five bookkeeping tips for you, the small business entrepreneur.
You probably keep a lot of the financial details of your business in your head: which supplier needs to be paid, which customers are outstanding, and even the mileage to your last client meeting. It’s understandable to do it this way. You won’t need to learn new software, there is no danger of a system crash that loses all your data, and you can tweak your budget as often as you need without sitting at a desk.
When you don’t have a system and processes, unpleasant surprises can pop up, and you can miss goals and important paperwork. Getting a better handle on your books can help you to make and keep long-term goals, smooth out the seasonal ups and downs of your cash flow and even improve your profits. It can also help you avoid trouble with the Canada Revenue Agency.
Five Bookkeeping Tips for Your Small Business
- Plan for Major Expenses.
Be honest about the expenses coming up in the next one to five years. Is it likely that you will need to upgrade your vehicles? Is your equipment on its last legs?
It is essential to acknowledge the seasonal ups and downs and how they will affect your ability to spend during those times.
By ensuring that you have forecasted major upgrades or peak staffing costs, you will avoid taking money out of the company in good months and finding the business short in slow months.
- Track Your Expenses.
Expenses can be hard to track, which means that you may be missing tax write-offs from which you could have benefited.
Business credit cards are a handy tool to keep all expenses together and tracked. Keep up to date with your payments, and don’t add late charges to your costs!
It’s also helpful to make notes on your receipts – if you met a client or the purchase was for a particular project. This will help substantiate your expenses for your tax records should you be audited.
Converting your printed receipts and documents into digital files, which are CRA compliant, can keep you proactive and productive. And when you are organized, you can save time, stress and even money in the long run.
One of our clients lost all their paperwork stored in their basement during a flood. Thankfully, we had everything entered and backed up in their QBO account.
That goes for car mileage too. When driving long distances to meetings, make sure you either keep track of your mileage or calculate with Google Maps to log how far you travelled and the associated costs.
- Record Deposits Correctly.
You may make various types of deposits in your account throughout the year, from loans to sales revenue, to cash infusions from your personal savings. If you cannot account for where each of the deposits came from, you’re leaving the business open to paying taxes on money that isn’t income.
Any money earned by the company must be deposited into its bank account before it can be spent – even on company items. Using cash to buy supplies is enticing, but this may quickly throw your accounting system off.
- Set Aside Money for Taxes.
You know that you will have to pay taxes, and you know when. So systematically put money aside for it. Unpaid taxes can incur penalties and interest from the CRA, so make sure the money is there when needed.
Putting money aside each month or each time a contract is paid will be less of a sting when taxes are due.
- Keep an Eye on Your Invoices.
Late and unpaid invoices can hurt your cash flow. Make a plan for if clients are 30, 60 and 90 days late and put a process in place to collect overdue invoices. Remember, every late payment is an interest-free loan that hurts your cash flow.
Our 6th tip is to consider bringing a bookkeeper in as part of your business team.
Trusting the financial details of your business with anyone can be a big step. Opening up your finances to someone is like letting them see you naked (Jenn) you need to have TRUST!! Trusting a bookkeeper for your growing business makes good business sense. Bookkeepers aren’t there to judge how many Starbucks coffees you buy, they are just there to deal with the numbers, help you understand them, and how you can make the money work for you. Spend your time doing what you do best, and your bookkeeper will do the same! Bookkeepers love what they do, and you should be doing what you love, too. Be a business owner. Do what business owners do. Lead your company to bigger and better profits, and your bookkeeper will record your success.
Although this blog offers business advice, this content is for general informational purposes only—it is not intended to replace the guidance of a licensed legal or financial professional. Information created by third parties that we may link out to or feature on our site is not endorsed by us and remains the responsibility of such third parties. Bookminders Services Inc. assumes no responsibility for errors or omissions in the content.