Keep a deposit book. You might be surprised at how much time and detective work it can take to sort out what makes up your bank deposits, especially when you have a large amount of client invoices or are trying to reconcile your bank account(s) over a period of years.
Stay organized. While most bookkeepers don’t mind the “shoebox approach”, sorting and organizing your documentation takes time. By simply keeping your documents sorted by month, you’ll be saving yourself money.
Opt to do some of the bookkeeping yourself. Many of our clients prefer to do their own invoicing and receive their own customer payments in Quickbooks. Not only does this reduce the time spent by your bookkeeper when it comes to entering your transactions, it keeps you in tune with your cash flow on a more regular basis.
Get help at the right time. If you’ve opted to do your books yourself and you’re feeling a little lost, or have hired an inexperienced bookkeeper who’s making a mess of your books (it happens), seek help. It costs much more to repair a set of books than it does to enter things properly from the get-go. Save yourself the unnecessary expense of a huge clean-up by either having an experienced bookkeeper complete your books for you, or ask the questions and receive proper training on how to do them yourself. And the earlier the better.
Keep your business and personal transactions separate. Yes, we all know not to mix our personal and business transactions, but do we really know why? Once you flow a personal transaction through your business (or vice versa), you’ve opened your personal accounts as part of a business audit. That being said, in real life, it happens. As a small business owner, you’ve deposited personal money into your business bank account to cover your payroll while you’re waiting on customer cheques to come in. You’re at the grocery store with a $300 grocery bill, realize that you don’t have your personal bank card with you, and use your business bank card. The good news is that there are ways to account for these transactions in your books. The bad news is that if you mix the two frequently, it takes time to account for them.
Paper is your friend. Make sure to keep all of your source documents – receipts, statements, invoices, cheque stubs, deposit slips… Your bookkeeper will need these to properly reconcile your books, and they provide you with an audit trail in case CRA ever decides to pay you a visit. By putting them aside now, you’ll be saving yourself and your bookkeeper time when it comes to tracking down missing documentation. Expenses are not tax deductible without the source document. A lost invoice or receipt means increased taxes, which means less money in your pocket.
Do your best to keep the number of bank/credit card accounts to a minimum. If you’re dealing with three different bank accounts and twelve different business credit cards on top of an assortment of personal payment sources (don’t laugh, we’ve seen it), it is going to take some time to reconcile each one and determine which payment source was used for each receipt.
Pay your government remittances on time, every time. Late remittances mean penalties and interest, and we’d both rather see that money in your pocket. While CRA’s interest rates won’t break the bank, their penalties add up quickly (especially for things like monthly payroll source deduction remittances), and after a trust review automatically sit at 20% of the amount due for EACH late payment. We’ve seen small business owners end up owing thousands of dollars in penalties and interest for late remittances, and the heartbreaking part is that in most cases, this was avoidable.