Small businesses are critical to Canada’s economy, making up a staggering 98.1% of all employer businesses in the country. These businesses create employment, foster innovation, support local growth, and improve Canada’s economic competitiveness. They also have to deal with various obstacles, such as limited financing, lack of guidance, regulations, and competition. While these challenges can be overwhelming, addressing them individually can make the uphill task of running your business more manageable. If you’re looking for somewhere to start, your bookkeeping system is a great place.
Take these ten easy bookkeeping steps today to keep your small business organized:
Small businesses have to pay various taxes that vary by the nature of the business. These can include GST and HST, capital gains (for businesses that sell capital assets, like real estate), income tax on profits, and many others. For small businesses with staff, which may seem like an entirely different discipline to understand, there’s the added complexity of payroll taxes, deductions, and contributions.
Blogs like ours offer tips on understanding small business bookkeeping, as do various other resources. Start as soon as possible by educating yourself about the taxes that apply to your business in its current state. Still, since none of these are personalized to your business, professional counsel is your best bet.
The proliferation of accounting software has been a blessing for small business owners. User-friendly tools like QuickBooks, FreshBooks, and Wave offer automation, expense tracking, report generation, and efficient data entry. Many also offer other helpful features like invoice creation, payroll management, and time tracking, making them suitable for different small business types. Since many of these tools offer a free trial, you can experiment with software that works for your business without overanalyzing your options.
If you’re not automating tasks for efficiency, you are leaking time and business value. Small business bookkeeping includes a range of repetitive tasks. List the things you need to do regularly and rank them by priority. Then, choose one to automate. Even something as simple as setting up automatic feeds that import transactions directly into your accounting software can save you valuable time and reduce error-prone manual effort.
Challenging as running a small business might be, there has never been a better time to be a technology-savvy entrepreneur. Every small business owner can access an army of robots living in the cloud. You need the right resources, and it all starts with one simple but transformational step – digitizing your data.
Use scanners or apps on your phone to digitize your receipts, replacing a mound of crumpled, hard-to-read paper with a searchable repository of all your transactions. When your tax deadline approaches, the last thing you want to do is ruffle through drawers, looking for that one receipt you remember putting somewhere safe.
Use separate bank accounts
Staying with the spirit of keeping things simple, this simple step will save you sleepless nights and a substantial amount of time. Use different bank accounts for your personal and business finances. Entrepreneurs often underestimate the effort required for small business bookkeeping and use the same accounts for all transactions, assuming they can always sift through the list when the time comes. That approach is a recipe for immense stress. Separate your accounts and maintain the boundary between your work and personal expenses; this clarity’s advantage will be evident sooner than you expect.
Track invoices and payments
Creating a tracking system is one of our first recommendations for small business owners. It is a human tendency to seek specialist help when it’s (or about to be) too late. In our experience, many clients contact us with an emergency request for help with their taxes. As the conversation continues, we discover that the customer hasn’t been tracking their invoices and payments. Make no mistake. While keeping a simple record seems obvious enough, not having one can have disastrous consequences for your tax filing process and in case you’re audited. Do the smart thing and maintain a detailed record of all your invoices and payments.
If you have a staff on your books, you will need a payroll system that gives you complete visibility and ensures all the necessary compliances are in place. While the smart move is to hire a payroll administrator (and you should), this move works best when you also have a professional accounting firm monitoring your salary processes. Also, deductions and contributions can vary by province, so unless you’re looking to become a payroll expert, ensure you consult a specialist with experience in your business structure and sector to avoid the costly penalties (and potential lawsuits) that come with non-compliance.
The best way to stay on top of your small business bookkeeping is to do it regularly. Reconcile your accounts – bank, credit cards, digital wallets or any other instruments – at least monthly to maintain accurate financial records. Discrepancies are a part of bookkeeping and are significantly easier to manage when you have a regular reconciliation process in place. These regular tasks can easily pile up, creating added pressure. It is a smarter choice to work with a professional accounting firm that reconciles its customers’ accounts regularly, ensuring you have a second pair of eyes on your finances and greater freedom for you to focus on business growth.
Plan for taxes
Death and taxes might be the only certainties in life, but that’s not all they have in common. You need to plan for both, and you have to plan for things to go wrong. Ensure you have a record of all important tax deadlines, and also make sure you have money set aside to pay your tax payments. A rule of thumb is to set aside 25% of your income for tax payments. The final figure will likely be lower based on your business, but having a surplus means you can make lumpsum payments instead of getting into complicated installment plans based on your business type.
Get professional help
We’ve said it throughout this post, and it does feel right to remind you again. Unless you want to become an expert in taxation, your best bet is to work with a professional accounting firm that understands your business. When finding an accounting partner, look for someone with small business bookkeeping experience and, preferably, an understanding your sector. Ask to speak with the team that will manage your account and be your point of contact. While external partners, these resources are just as important as people in your business, so make sure you choose the right partners and manage the relationship just as you would any critical business stakeholder.
Knowing how to manage finances is essential for small business owners dealing with taxes and rules. Even though accounting and taxation can be scary, you can simplify your business bookkeeping with a few easy steps. All you need are the proper habits, a can-do spirit, an openness to change, and a curiosity about technology and operational efficiency. Good luck!
Contact KSSP Partners LLP in Markham for your bookkeeping and business consulting needs
With a deep understanding of small business bookkeeping, KSSP Partners LLP offers experienced advisors to help you with every aspect of your business. Our accounting services are available to businesses in Markham and throughout the GTA. Learn more by filling in our contact form or calling us at 289-554-5997.