Recordkeeping is the key recipe to maximize expense claims and reduce tax obligations for your company. It not only makes life easier by making it easier for your business to prepare your accounts at year-end but also helps you plan your tax payments well in advance. It is the backbone of any business be it big or small. To save yourself from the last-minute tax preparation panic and trouble from tax authorities, bookkeeping is a must!
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How do small businesses keep good records?
To keep good records, your business should ensure that you regularly keep receipts, bank statements, payroll records, invoices, loan documents, deductions, credit histories on file for the year. Here’s a list of things you should do to keep your business records on track:
Be Regular and Accurate
Balance and record correct transactions of daily sales and cash receipts. Ensure that you pay your bills regularly and keep a record of each to keep your cash flow accurate. Whether you have an in-house team of accountants or an outside professional who provides bookkeeping services for your GTA business, make sure to oversee all the bookkeeping activities undertaken regularly. Any discrepancy in the figures can lead to tax penalties and inconsistency in the financial data of the company.
Keep Business and Personal Finances Separate
Organize and keep your personal and business finances separate to make a future reference easier. Not only records but also your business and personal account expenses and deposits should be isolated and recorded in batches. Personal bookkeeping and business bookkeeping are two separate areas wherein one deals with tracking all business-related expenses to make smart business financial decisions while the other aims to keep you on top of your personal finances aiming at financial budgeting and management of expenses.
Plan and Track Your Major Expenses
If there are any major expenses coming your way, consider taking them into your current business plan to acknowledge and record them effectively when the actual expense is carried out. This will also help avoid spending the cash out of the company for expenses that are not a current priority to save for the future. To benefit from tax write-offs, make sure that you track each and every expense on a daily basis so you don’t miss out on the benefits that you could be entitled to.
Audit Your Records
Be it manual or automatic, keep an account of your records on a weekly/monthly/quarterly basis. The auditing process is essential to ensure that the accounting staff or your accounting service providers are following suitable procedures. Self-reviewing their monthly activity will help you keep a tab on these practices and in turn will help you uncover any discrepancy that can be further investigated for the root cause of the concern. This is an opportunity for you to assess your businesses’ health and check if you have all the information to back up for any questions from the CRA.
Use A Reliable Accounting Software
You can either follow the manual bookkeeping process that is a traditional way of maintaining your financial documents using a pen and paper ledger or an offline excel sheet to manage all expenses. This type of bookkeeping is time-consuming and has more room for errors which is why you should consider switching your record-keeping to dependable accounting software that saves time as well as helps you integrate your invoicing system and other third party software.. A cloud accounting software that offers real-time reporting and analytics can automate the tedious process of bookkeeping.
Keep Your Accounts Receivables Separate From Loans
Loans and accounts receivables impact your bottom line differently. Not keeping them separate in your bookkeeping records can affect your cash flows and operating income leading to a financial crisis potentially in the future. Make sure that you use accounting software that separates the two to delineate the contribution of each in your financial records.
Stay in Touch With Your Bookkeeping Consultant
Maintain an ongoing relationship with your bookkeeping consultant and avail the advice you signed up for not only during the tax time but on a regular basis. This will help you keep a check on the recordkeeping activities as well as ensure that you are well informed and advised throughout the year to mitigate any unforeseen crisis situation.
Bookkeeping is a must-have for any business. The whole idea of this process is to stay consistent and capture information for your business regularly, updating and reviewing it on a timely basis.
It is advised that you should diligently evaluate your accounting records for comprehensiveness so that you are ready to handle an audit. All these tips will help you stay organized and will keep all your financial problems at bay in the long run.
