Managing finances doesn’t have to be the bane of your professional existence. Nor does it have to take you away from the personal reasons you started your business in the first place.

Instead, the basics of small business accounting come down to a handful of best practices and only three essential reports: your balance sheet, income statement, and cash flow statement. These might sound like they require a professional bookkeeper, but far from it.

The following accounting checklist lays out a recommended timeline for the accounting functions that will show the state of your business and streamline your tax preparation.

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Daily Business Accounting Tasks

When it comes to daily accounting business needs, you have a pretty light plate. You have plenty of financial statements to review every week, month, quarter, and so on, but your daily business accounting responsibilities consist of the following:

1. Check cash position

Since cash is the fuel for your business, you never want to be running on or near empty. Start your day by checking how much cash you have. Knowing how much you expect to receive and how much you expect to pay during the upcoming weeks and months is important, too.

Weekly Accounting Tasks

Weekly accounting tasks are a little more involved. Welcome to your weekly accounting tasks, otherwise known as the land of invoicing, financial data management, and other business bank account fun.

This is where having a great accounting system really pays off. So, put on your accounting cap and get ready to dive into the heaviest of heavy financial management.

2. Record transactions

Record each transaction (billing customers, receiving cash from customers, paying suppliers, etc.) daily or weekly, depending on volume. Although recording transactions manually or in Microsoft Excel sheets is acceptable, it is probably easier to use small business accounting software like QuickBooks. The benefits and control far outweigh the cost.

3. Document and file receipts

Keep copies of all invoices sent, all cash receipts (cash, cheque, and credit card deposits), and all cash payments (cash, cheques, credit card statements, etc.).

Start a suppliers file sorted alphabetically for easy access. Create a payroll file sorted by payroll date and a bank statement file sorted by month. A common habit is to toss all paper receipts into a box and try to decipher them at tax time, but unless you have a very small volume of transactions, it’s better to organize separate files for assorted receipts as they come in. Many accounting software systems let you scan paper receipts and avoid physical files altogether.

4. Review unpaid bills from suppliers

Every business should have an “unpaid suppliers” folder. Keep a record of each of your suppliers that includes billing dates, amounts due, and payment due dates. If suppliers offer discounts for early payment, you may want to take advantage.

5. Pay suppliers, sign cheques

Track your accounts payable, and have funds earmarked to pay your suppliers on time so you avoid late fees and disgruntled associates. If you can extend payment dates to net 60 or net 90, all the better. Whether you make payments online or drop a check in the mail, keep copies of invoices sent and received using accounting software to really make things easier during tax time.

6. Prepare and send invoices

Be sure to include payment terms. Most invoices are due within 30 days, noted as “Net 30” at the bottom of your invoice. Without a due date, you will have more trouble forecasting monthly revenue. Read more about getting paid faster in our guide to getting invoices paid on time.

7. Review projected cash flow

Managing your cash flow is critical, especially the first year of your business. Forecasting how much cash you will need in the coming weeks and months will help you reserve enough money to pay bills, including your employees and suppliers. Plus, you can make more informed business decisions about how to spend it.

All you need is a simple statement showing your current cash position, expected upcoming cash receipts, and expected cash payments for this period. This is known as a cash flow statement.

Monthly Accounting Tasks

Whether you have a seasoned or new business, brick and mortar or eCommerce, there are numerous monthly accounting tasks you need to handle.

8. Balance your business cheque book

Just as you reconcile your personal checking account, you need to know that your cash business transaction entries are accurate and that you are working with the correct cash position. Reconciling your cash makes it easier to discover and correct any errors or omissions — either by you or by the bank — in time to correct them.

9. Review past-due receivables

Be sure to include an “aging” column to separate “open invoices” by the number of days a bill is past due. This gives you a quick view of outstanding customer payments. The beginning of the month is a good time to send overdue reminder statements to customers, clients, and anyone else who owes you money.

At the end of your fiscal year, you will be looking at this account again to determine what receivables you will need to send to collections or write off for a deduction.

10. Analyze inventory status

If you’re managing inventory, set aside time to reorder products that sell quickly and identify others that are moving slowly and may have to be marked down or written off. If you check regularly (and compare to prior months’ numbers), it’s easier to make adjustments so you are neither short nor overloaded.

11. Process or review payroll and approve tax payments

While you have an established schedule to pay your employees (usually semi-monthly), you need to meet payroll tax requirements based on federal, provincial, and local laws at different times, so be sure to withhold, report, and deposit the applicable income tax and disability taxes to the appropriate agencies on the required dates.

Review the payroll summary before payments are disbursed to avoid making corrections during the next payroll period. A payroll service provider can do all this to save you time and ensure accuracy at a reasonable cost.

12. Review actual profit and loss vs. budget and vs. prior years

Your profit and loss statement (also known as P&L or income statement), both for the current month and year-to-date, tells you how much you earned and how much you spent. Measure it against your monthly or quarterly budget. Comparing your actual numbers to your planned numbers highlights where you may spend too much or not enough.

If you have not prepared a budget, compare your current year-to-date P&L with the same prior-period, year-to-date income statement to identify variances and make adjustments.

13. Review month-end balance sheet vs. prior period

By comparing your balance sheet at one date — June 30, 2022, for example — to a balance sheet from an earlier date — December 31, 2021 — you get a picture of how you are managing assets and liabilities. The key is to look for what is significantly up/down and understand why. For example, if your accounts receivable are up, is it due to increased recent sales or because of slower payments from customers?

Quarterly Accounting Tasks

Quarterly accounting tasks largely deal with the big picture elements of running a small business or being self-employed: tax estimates, quarterly payments, and a constant reminder that you need a great accounting solution.

14. Prepare revised annual P&L estimate

It’s time to evaluate how much money you are actually making, whether your net assets are going up or down, the difference between revenues and expenses, what caused those changes, and how you spend your profits. While you’re at it, identify trouble spots, and make adjustments to improve sales and margins.

15. Review sales tax and make quarterly payments

The CRA requires that all small businesses that earn more than $30,000 make HST/GST payments. Businesses can choose which reporting period they prefer. But CRA rules state that you must change your HST/GST reporting period if you experience an increase in sales and taxable supplies.

If your taxable supplies reach more than $1.5 million you must switch to quarterly reporting, and if they exceed $6 million, you must switch to monthly reporting. Learn more about changing your reporting period here.

16. Compute estimated income tax and make payments

The CRA collects income taxes, so be sure to review your year-to-date P&L to see if you owe any estimated taxes for that quarter. Your tax accountant can assist if necessary.

Annual Business Accounting Tasks

Once a year, you celebrate a few things: your birthday, important anniversaries, and probably some holidays. You likely don’t have “inventory review” or “tax filing” on your list of things to celebrate, but they’re still important — especially when we’re talking about annual accounting tasks.

17. Review past-due receivables

Now, it’s time to check significant past due receivables and decide whether you think customers will eventually pay, whether to send past due bills to a collection agency, or whether to write them off for a deduction.

18. Review your inventory

Review your current inventory to determine the value of items not sold. Any write-down of inventory translates to a deduction on your year-end taxes. If you do not write down unsellable inventory, you are overstating your inventory balance and paying additional taxes that you don’t owe.

19. Review and approve full-year financial reports and tax returns

At tax time, carefully review your company’s full-year financial reports before giving them to your accountant. Before you sign your return, be sure to review it for accuracy based on your full-year financial reports. If the CRA audits your company and finds any underpayment of taxes, it will come to you, not your accountant, for any additional taxes, penalty, and interest.

Business Accounting Checklist for Success

If these accounting needs sound like a lot, that’s okay: It is. But, with proper planning and a few deep breaths, you can do this.

Accounting software like QuickBooks can help you generate financial reports, manage taxes, and take care of other small business accounting tasks. This kind of software can make your life as a business owner much, much easier. If you’re still feeling uncertain, don’t be afraid to speak with a professional bookkeeping service about securing their help.

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