Whether you hire a bookkeeper or accountant or manage everything yourself, it pays to take an organized approach to recording and storing this information. Canadian tax law requires all small business owners to keep income and expense records. Three types of business records you need to keep relate to income, expenses, and property.
Business Income Records
You can make tax time easier on yourself and your business if you keep a record of all your gross income, whether you receive it in the form of a cash payment, property, or as services. When you receive payment, each transaction should include notes about the exact sum you received, the date, and the source. You should keep any proof of the transaction on hand, such as invoices, receipts, contracts, and cash register tapes. It’s also important to keep bank deposit slips that provide proof of payments into your business account.
Business Expense Records
You should retain receipts, invoices, and vehicle logs for every allowable purchase and expense related to your business. If your business is based at home, you can also claim a portion of your utilities, repairs, and maintenance costs, insurance, and rent, so keeping relevant records helps you with these calculations. Records of purchases should include the date, details of the seller (and the purchaser if you have employees), a description of items purchased or services supplied and the seller’s business number if they are registered for GST/HST. If you don’t have a receipt, you can record these details in an expense journal. To help calculate your claim for capital cost allowance, consider keeping a record of any property you buy or sell, along with the cost, vendor and date.
Storing Financial Records
Keeping information electronically is the convenient way to keep track of your business’s financial records. You can easily track those finances in QuickBooks Online, where you can store records, run reports, and keep an eye on your financial situation. But you might also need to keep copies of the original paper documents. Try to be disciplined about setting aside time each week to file receipts and keep copies of invoices. Consider developing an accessible file system, such as binders with clearly labelled plastic pockets or a filing drawer with individual files folders, and store records by type and in date order. It helps to make sure your employees are equally well-organized. Taking a systematic approach to recording and filing of financial information helps you keep on top of your business monitoring and planning. It also prevents a last-minute paper chase, reducing stress at the end of your tax year.
Accurate record-keeping makes it easier to run your business efficiently. Keep your books accurate and up to date automatically. Change the way you manage your finances now.