Small businesses have a lot going on. All at once. And if, like most small business owners, you’re wearing a million hats. Organizing receipts and invoices can be a tedious tax. Even if you are delegating or outsourcing your bookkeeping, you still need to provide them with receipts or transactions for your business books to be accurate.
While it can be tempting to put off organizing your business finances for the end of the year or for tax time, business owners who stay organized find that they have a better handle on their business profitability.
Accurate financial records
Staying organized with your business finances means that you know exactly what is going on in your business financially. You’ll be better able to see what is making you money, where you are spending it, and make changes as and when needed.
Ready for the CRA and taxes
The CRA can go back up to six years and ask for business records. If your business finances are organized, showing proof of documents and any deductions you have claimed can be easy. It also makes it easier to plan with your accountant for the upcoming tax year and make sure that your taxes are optimized.
Easy to access records
One of the benefits of keeping all your business records in one place is that you can access is at any time. Whether creating a new client proposal or renegotiating a supplier contract having access to all documents for your financial transactions can make it easy for you and your team to complete these tasks.
In Canada, income tax returns can be audited by the CRA for six years. As a result, it is essential to hold on to records and receipts that support your tax return for those filings as well.
Here are some other items that you should have accessible in your records:
- Contracts – any long-term contracts with your clients or suppliers that support transactions should be kept for seven years.
- Invoices – make sure to keep a record of any invoices that you issue for payments to clients and customers
- Receipts – recording any expenses and keeping a copy to support those expenses is crucial
- Bank deposit slips – if you deal with any physical cash and make physical deposits, holding on to these bank slips is essential.
If you’re ready to get your business finances organized, we can help keep you on track.
Figure out a process that fits your work
It can be tempting to start a new workflow or try out a new app because it worked for your peers. Many people recommend starting with a spreadsheet. While that works for many, if you’re never at your desk, you will never find the opportunity to update it. Instead, thinking about organizing receipts in a way that works well in your life today is helpful.
For example, if you always have your phone on you, taking a photo of each receipt might be simple enough or having a running list in your Notes app to help you jot down the receipts as you incur your transactions.
Keep a separate business credit card
Most of us buy things online or use our credit cards anyways. Make sure to use your business credit card only for business expenses. This way, it can be easy to categorize the expenses later on as you reconcile your credit card statement. Not only does this make it easier for your bookkeeper or accountant to record transactions, but it also keeps your records clean.
Go digital: lean on software and apps
Whether you’re a small business with a few employees or a team of one, you can use many digital workspaces. A huge benefit of cloud accounting is that it can help you connect in real time and offer solutions to facilitate your bookkeeping workflows. Some of these even connect to various bookkeeping and accounting software, making it a lot easier to a seamless way to keep track of your and your team’s expenses.
Create a filing and categorizing system
Once you have a method to capture your receipts, it is essential to categorize them. You can organize them in a paper format, but digitizing everything is becoming increasingly popular. Each category of expenses may be recorded in a different line on your financial statements. Having a way to categorize them can help you have a more accurate picture of your finances. In addition, some categories of expenses, such as meals and entertainment, may need to be categorized separately because they are treated differently in tax.
Set a recurring reminder in your calendar
Organizing and keeping track of expenses can easily fall off your radar when life gets busy. However, correctly understanding your business finances can be the key to uncovering opportunities for growth in your business.
Reviewing transactions on time helps you stay organized, and it can also help you recognize any red flags or alert you to any opportunities to save money. Set aside time every week or every month for this process. The frequency you choose may depend on the volume of your transactions.
If you are a new business owner or a first-time entrepreneur, it can be easy to think that you will eventually get your finances organized. However, starting early in your business life makes it easier to stay organized.
Thinking about a system that works for you now and making it a habit in your business can help you stay organized. You can always tweak the process as your business grows or delegate it eventually.
If you’re feeling overwhelmed with your business finances, there are ways to make it easier. Your bookkeeper or accountant can help you with the systems and processes to make your business finances easier to manage. Review your current practices and see where to improve your processes and workflows. Or, if you need help figuring out where to start, your bookkeeper or accountant can help.
Whether you choose to do it yourself, with in-house help or outsource it, consulting with an accountant can help set up your business finances in a way that works for you.
At KSSP Partners LLP, our experienced Chartered Accountants provide modern accounting, bookkeeping and tax solutions to meet the needs of your growing business. Whether you want to implement a new accounting solution or outsource your accounting function, our knowledgeable and experienced accounting team at KSSP Partners LLP can provide clients in Markham, Toronto and across Ontario with innovative accounting solutions. To learn more about how we can help you and your business with all your accounting and bookkeeping needs, contact us online or by telephone at 289-554-5997.