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FIVE BOOKKEEPING TIPS FOR SMALL BUSINESS
Unless you are an accountant or a fan of working with numbers, bookkeeping is probably not your favourite task. But adopting some good habits early can help you avoid costly errors when it comes to record keeping.
You probably keep a lot of the financial details of your business in your head: which supplier you need to pay, which customers are outstanding, etc. It’s understandable to do it this way, you won't need to learn a 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 down at a desk.
However, when you don't have a system and processes in place, unpleasant surprises can pop-up, goals can be missed and important paperwork forgotten. Getting a better handle on your money 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 to stay out of trouble with the Canada Revenue Agency.
Here are our five tips for small business bookkeeping.
1. Plan for Major Expenses. Be honest about the expenses that could be coming up in the next one to five years. Is it likely that you will need to upgrade your facilities? Is your office equipment on its last legs?
It is important to acknowledge the seasonal ups and downs of your business, and how they will affect your ability to spend during those times.
By making sure that you have forecasted for major upgrades, or peaks in staffing costs, you will avoid taking money out of the company in good months and finding yourself short in slow months.
2. Track Your Expenses. Expenses can be hard to track, which means that you may be missing tax write-offs that you could have benefited from.
Business credit cards can be handy tools to make sure all expenses are kept together and tracked. As long as you keep up to date with your payments that is. Most providers have now adopted the service of categorizing your bill into types of expenses, meaning one less task for you to do.
To help prepare for audits, it is also useful for you to make notes in your calendar of the clients that you are meeting for each of those coffee dates, lunches and events. This will help substantiate your expenses for your tax records, should you be audited.
That goes for car mileage too. When driving long distances to meetings, make sure you either keep track of your mileage or do a calculation with Google Maps to log how far you travelled and the associated costs.
3. Record Deposits Correctly. Whether it’s a pocket notebook and pencil, an Excel spreadsheet or financial software like Sage, make sure you keep track of what is being deposited into your business bank account.
You are likely to make a variety 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 have come from you’re leaving yourself open to paying taxes on money that isn’t income.
4. Set Aside Money for Taxes. You know that you’re going to 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 you need it.
By putting money aside each month, or each time a contract is paid, it will come as less of a sting when they are due.
5. Keep an Eye on Your Invoices. Late and unpaid bills can hurt your cash flow. Assign someone to track your billing. Then put a process in place for if a bill goes unpaid. That can be issuing a second invoice, making a phone call and even levying penalties such as extra fees at certain deadlines.
Make a plan for if clients are 30, 60 and 90 days late. Remember, every late payment is an interest-free loan that hurts your cash flow.
FIVE BOOKKEEPING TIPS FOR SMALL BUSINESS
Bookkeeping is probably not your favorite task. By adopting some good habits early, you will avoid costly errors in record keeping.
When you don't have a system with processes in place, unpleasant surprises can pop up, goals can be missed, and important paperwork forgotten.
Getting a better handle on your money will help you to make and keep long-term goals, smooth out the seasonal ups and downs of cash flow and improve your profits.
It will also help you to stay out of trouble with Canada Revenue Agency.
Track Your Expenses
Expenses can be hard to track, which means you could miss tax write-offs you could have benefited from.
It is important to make notes in your calendar and on the associated receipts denoting the client you met and the reason for the meeting. This will help substantiate your expenses for your tax records.
When you are driving for business, keep track of your mileage and gas.
Record Deposits Correctly
Whether it’s a pocket notebook or a spreadsheet, make sure you keep track of deposits in the business bank account. If you cannot account for where each of the deposits have come from, you’re leaving yourself open to paying taxes on money that isn’t income.
Track Your Invoices
Late and unpaid invoices can hurt your cash flow. Develop and put a process in place. When an invoice goes unpaid, resend the invoice, make a phone call or levy penalties such as extra fees at certain deadlines.
Create a plan to deal with clients that are 30, 60 and 90 days late.
Remember, every late payment is an interest-free loan that hurts your cash flow.
Set Aside Money for Taxes
Create a system to put money aside for taxes and stick to it. Unpaid taxes will incur penalties and interest from the government, so make sure the money is there when you need it. This completely avoids the pain and struggle when that big bill is due. You will be earning interest on the money that is put away.
Put money aside each month, or each time a contract is paid. This can be automated in your bank account, so it becomes a painless process.
Plan for Major Expenses
List the expenses that could be coming up in the next one to five years. Is it likely that you will need to upgrade your facilities? Is your office equipment on its last legs?
By making sure that you have planned for major upgrades or peaks in staffing costs, you will avoid taking money out of the company in good months and finding yourself short in slow months.