There’s a lot of details to think about when starting a small business. And unless you have a background in accounting or are a fan of numbers, figuring out how to manage your books is probably not your favourite task.
But without proper processes in place from the beginning, unpleasant surprises can pop up, goals can be missed and important paperwork can be lost or forgotten. For better or for worse, good record keeping is a must for every business. And adopting good habits from the get-go will likely save you from making costly errors later.
Choose the software that’s right for you. Yes software. No one does bookkeeping manually anymore. But just because you need software doesn’t mean it has to be a huge expense. There are a lot of different options – some are free and some are paid – that allow you to track expenses, issue invoices and manage cash flow. Consider asking a trusted friend or advisor for suggestions before choosing your software. But remember to keep it simple. Don’t invest in software that is more complex than your business needs. The more robust the software, the more complicated it will be to use.
Stay up-to-date. One of the biggest bookkeeping mistakes small business owners make is letting paperwork pile up and then tackling months of receipts and expenses in one go. This approach leads to lost or forgotten items and causes nothing but headaches, frustration and sometimes even lost revenue.
Keep all original receipts. The most common bookkeeping misconception small business owners make is to log an expense using only their credit card statement as proof. The CRA doesn’t accept credit card receipts, nor does it accept the signed credit card slip. Only the itemized bill (which includes the company’s HST number) can act as a legitimate proof of expense.
Always meet your deadlines. Know your CRA deadlines – such as quarterly HST payments – and meet them. If you can’t meet your payment obligations, make sure you still file on time. Not doing so will result in costly penalties and could flag you for a time-consuming audit. Payment plans can usually be arranged with CRA, if necessary.