6 Best Bookkeeping Practices for Your Business You’ll Want to Have and to Hold
Owning a business can be a lot like marriage. There’s commitment, loyalty, and of course passion. If you’re an existing business owner, or if you’re about to take the plunge, we’ve outlined an advice speech, 6 Best Bookkeeping Practices for Your Business You’ll Want to Have and To Hold, till you part.
1. Get Organized
This doesn’t refer just to clutter. This means that when things start to get hectic, as it does with any business owner, don’t let things slide, or accumulate. Making sure things are done properly from the start, will save you a lot more time down the line.
2. Have an Audit Trail
This is a must! This will be your number one suit of armour to protect you against all the “in-cases” that happen to business owners. Things such as disputes, tax audits, and protecting against fraud etc.
3. Use Software
The benefits of using a software far outweigh not using it. Perhaps you’re a business owner that wants to keep your spending in check? You get full control! You can see how much your earning, your profits, budget, spending, all of which help you to become more careful, and sensible when it comes to purchasing. Software is efficient but not a complete solution. To optimize your bookkeeping, consider utilizing a bookkeeping service firm.
4. Reconcile your monthly statements
Hate the year end tax time? Well make that time smoother and pain-free by keeping a routine of closing your monthly accounting records. Verify clients have been invoiced, double check deposits posted, make sure bills have been paid, reconcile credit card statements, loan balances and lines of credit, track your assets and monthly depreciation, write off bad debt, verify all checks and invoices have been accounted for, review financial statements, and update your budget. Print, save and back up, back up, back up!’
5. Document retention for 7 years
Section 230 of the Income Tax Act requires books and records be kept in a format that allows assessment and payment of taxes. The Excise Tax Act, Employment Insurance and Canada Pension Plan legislation also have this requirement.
Records to Keep:
- financial statements
- ledgers and journals – computerized or manual
- log and appointment books
- spreadsheets and working papers
- tax reports and records
- your Business Journal
- other documents that support your claims
Supporting Documents to Keep:
- bank statements, cancelled cheques and deposit slips
- sales invoices and receipts, cash register tapes, purchase orders
- credit card statements and all business purchase receipts
- legal and government correspondence
- any other documents and correspondence including e-mails
6. File on time
Filing your GST/HST return late could mean penalties and interest charges tacked on to your existing outstanding balance. To avoid these extra charges, ensure your file your returns early.
Source: Transcription from the video “Bookkeeping Tips and Best Practices – Small Business BC” by Puneet Dutt of businessexchange.com