Tag: record keeping

Accounting records that small business owners must keep

It may not be fun, but as a small business owner you’re required to keep accurate financial records of all activities for your company for six years.

In addition to your financial statements, you’ll need to to keep accurate records for all the individual accounts that make up those statements. Here are some of the major ones:

  • Accounts receivable – Who owes you, how much do they owe, and for how long have they owed you?
  • Accounts payable – Who do you owe, how much and for how long?
  • Inventory – How much did you buy, when did you buy, and how much did you pay? how you account for your inventory will affect your cost of goods sold.
  • Payroll – Total salaries paid to employees, payroll taxes and deductions.
  • GST/HST and Provincial Sales Tax – All businesses with an income greater than $30,000 per year are required to collect and submit on behalf of the federal government a Goods and Services Tax (GST) and, depending where your business operates, Provincial Sales Tax (PST) or Harmonized Sales Tax (HST).
  • Cash – Cash inflows and outflows should be recorded to maintain proper control of cash.
  • Fixed assets – Record what you bought, how much you paid, and when you bought, along with depreciation amounts.
  • Other records – Insurance, leases, investments.

To support any tax claims for your small business, you’ll need to keep good records. Income records must include the date, amount and source of income as well as sales invoices, contracts and fee statements. Expense records must also show the date, name and address of suppliers/ sellers, name and address of buyers and a full description of the goods or services. You should also keep records of daily income and expenses.

Want more advice? Check out our blog post Tip of the Month: Small Business Record Keeping.

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When record-keeping becomes too much

small-business-record-keepingPart of being a successful entrepreneur is keeping on top of your records. But what do you do when, despite your best efforts, you find your records getting too much for you to handle?

Here are some tips on how to manage your record-keeping:

  • Recognize when it’s time to bring in outside help. If you’re too busy or are having trouble understanding the ins and outs, hire a bookkeeper who knows their stuff. This way, you can focus on the immediate needs of your business while ensuring your financial records are taken care of.
  • If you can’t hire outside help, invest in software that can help you by providing a layout, streamlining data and saving time for you.
  • Top up your knowledge. You don’t have to become a financial wizard, but understanding the hows and whys of your records can reduce some of the confusion, thereby making sense of all the various forms and records you need to work with.
  • Stick to a system. Disorganized receipts, invoices, and other records can spell disaster for a small business. Whether your record-keeping system is digital or not, find what works for your business and don’t deviate from it. You’ll be less likely to get lost if you find a system that makes sense to you.
  • Break things down into pieces. You’re less likely to put off a smaller task than you are a large one – plus, it’s easier to understand. For example, if you have a mountain of receipts to organize, start off by categorizing them by date, and focus on getting this month’s receipts in order before moving on through the past.

Keeping good financial records in your small business can be intimidating, but getting out from under it isn’t impossible. Help with maintaining your business records is always available!

For more help with getting your financial house in order, check out our small business online training course!

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Tip of the Month: Small Business Record Keeping

This month’s topic might be more of an obvious reminder, but following this tip can save you plenty of time, stress and money in the long run. Keeping up with your paperwork, specifically your financial records and statements, on a monthly basis (or more often if you have a high volume of transactions) will provide plenty of perks including:

  • A clear picture of your business’ financial health;
  • Greater awareness of spending, which can help you control and lower operating expenses;
  • Less time and worry when you have to file income tax and GST remittance;
  • Being prepared for an audit, if ever the situation arises;
  • Improving your odds of securing capital, such as a loan for growing your business, by being able to clearly outline your company’s past performance; and
  • The ability to identify sales trends based time of year, marketing expenditures and so on.

Have we convinced you yet? We hope so. Understanding your business’ financial health can make you far more competitive and profitable.

What if I haven’t been keeping these records up to now?

Catching up can be a daunting task, so unless there’s a pressing need, it’s easier to break the job down into bite-sized pieces. Update your current month, along with the earliest month for which records have not been kept up. For example, if you started your business last January, then right around now you should do January’s records along with July’s. Next month, do February’s records along with August. This strategy will allow you to keep up with your current record keeping and catch up at the same time.

A note about business receipts

Keep your receipts and file them in an envelope labelled with the month in which they occurred. If the receipt isn’t obvious, or you’re worried about it fading (say perhaps when you leave it on the dash of your truck for two weeks, you crazy entrepreneur, you!), make a little note on the back about what it was for and what job you billed it to if that applies to your business.

If record-keeping becomes too much

Recognize when it’s time to bring on someone else. If record keeping is consistently put on the back burner so you can handle the immediate needs of your business, or if you struggle to understand how it works, find a bookkeeper. They need not be an employee. Independent contractors are a great way to manage jobs like this. Don’t feel bad about it – the key is that the job is done well and on time. No one is a specialist at everything, so play to your strengths and find someone who can help you counter your weaknesses. If you aren’t in a position to hire someone else, there are plenty of software programs that can help you out providing a layout, streamlining data and saving time for you.

Financial record keeping for your small business can be intimidating, but breaking it down into small pieces and staying up to date will save you time, money and stress. That’s something we all can benefit from!

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