Updated: Feb 7, 2022
Starting a business in Canada can be fun and exciting. There is the thrill of the new idea and the magic of seeing your idea come to life before your eyes! But not everything is roses and rainbows. Being a business owner is a big responsibility, and it can come with its own set of challenges. There are many things to manage and think about.
One of the most common frustrations for business owners we come across, is not knowing how to establish good bookkeeping practices in their businesses. Luckily, bookkeeping is our expertise!
Have you ever worried about how you will manage all the financial responsibilities of the business and what it might entail?
You’re not alone.
We’ve got a few tips to help you approach your business with good bookkeeping practices!
Why is bookkeeping so Important?
The purpose of bookkeeping is to keep a record of all your financial transactions for your business. When transactions are well recorded, it allows you to summarize your transactions for various uses. For example, this record keeping can be a reference point for any individual sale, cost of goods, asset acquisitions, accounts payable, etc. within your business. It can also keep track of your applicable sales tax liability and can show how much you are owed, or will owe if your books are up to date.
How does bookkeeping affect your business?
There are so many benefits to establishing good bookkeeping practices in your business. Apart from keeping you organized, good bookkeeping practices allow you to track your financial progress in goals, targets and cash flow. It also gives you detailed insight into where your money is going.
A good accountant and/or bookkeeper can give you recommendations on how to manage your business finances better and can suggest some great money-saving options for you!
Bookkeeping is required for any business. Whether you are a start-up or a multi-million dollar franchise, bookkeeping affects your everyday operations. The down-side to bookkeeping though, is that it is not a straight-forward, cookie-cutter science. The truth is bookkeeping can be very time-consuming (if done properly), without any help from an accountant or bookkeeper.
Where do you start?
First things first: Open a Business Bank Account
It is always good practice to open a business bank account if you have a small business. Opening a separate business account will save you from having to sort through and separate business and personal transactions for your bookkeeping. It will also make your business look more professional.
Some things to remember:
If you think you may need a loan, it is easier to open a business account where you have a personal bank account.
You will need to have a registered business to open a business account
Shop around for an account that makes the best sense for your business.
Second: Track your expenses. Go paperless!
You should keep your taxes and receipts organized for the purposes of completing your tax return easily and in the case of any audit. Taxes are already complicated enough, if you can keep your side of things organized on the cloud, the process will go 10x smoother.
Third: Set your business up with an Accounting software
From basic invoicing and billing, to tax calculations and project management, accounting software is an essential tool for your business' financial data. It also helps manage clients, reconcile bank accounts, and generate insightful financial reports that help your business grow smoothly and continuously.
Fourth: Determine your basic tax obligations
Tax obligations vary depending on the legal structure of the business. If you’re self-employed (sole proprietorship, LLC, partnership), you’ll claim business income on your personal tax return. Corporations, on the other hand, are separate tax entities and are taxed independently from owners. Your income from the corporation is taxed as an employee. For your sales taxes, you will be required to collect and remit the net tax received to CRA periodically. As a rule of thumb it is suggested to set aside about 25-30% of your income to cover your tax obligations every year.
Last, but not least: Hire a bookkeeper
Once you've been able to accomplish 1-3, hiring a bookkeeper is a natural next step.
As you grow, you will need to delegate and when it comes to bookkeeping, the sooner the better. You will need someone on your side to understand your business and keep you organized in the back end as you scale the company.
During tax season, bookkeepers also provide some insight regarding your returns and collaborate with the accountants to ensure your business is in the clear. They can also help make sure that your business habits will not get you into difficult situations, to keep CRA out of your hair.
At Saltybooks, we provide quality cloud based bookkeeping solutions for your business. Give your business the advantage. Contact us for a FREE consultation!