Running your business involves handling multiple priorities. You must set business plans, meet sales quotas, satisfy customers, and more. Bookkeeping often gets pushed to the bottom of the pile.
But you must catch up on bookkeeping before closing out the year. It’s essential for meeting Canada Revenue Agency (CRA) recordkeeping requirements and filing proper tax returns, as well as avoiding CRA penalties.
Bad bookkeeping practices can leave you months or years behind on managing your books, as well as:
- Cumulative errors in financial statements
- Overpayment or underpayment of taxes
- Missed tax deductions
- Cash flow problems due to outstanding receivables
- Challenges with securing business capital
- Inaccurate or misleading data in reports
Accountero can help you to catch up on bookkeeping. However, if you want to handle it yourself, follow the steps below.
- Collect outstanding receipts
Collect, organize, and file receipts and statements related to business expenditures. Refer to the CRA’s eligible business expenses to ensure you claim all available business deductions.
Review vendor accounts to ensure you’ve paid all expenses in full. Ensure you have a copy of every bill for your records, including ongoing services. Ask vendors for a copy of missing bills.
- Review customer invoices, payments, and debts
Review customer accounts to ensure you’ve sent all invoices due and have received payment for outstanding invoices. Send pending invoices and follow up on overdue payments.
In Canada, most businesses must use the accrual method of accounting. This involves reporting income from customers in the fiscal period in which you earn it.
Note: Farmers, fishers, and self-employed commissioned sales agents may use the cash method of accounting.
When reviewing outstanding customer accounts, you might determine they will never pay what is owed, no matter how much you attempt to collect. If they meet the appropriate conditions, you can write them off as bad debt expenses.
- Reconcile bank accounts
Compare transactions in bank statements with the same transactions in your records. If the numbers don’t match, identify and fix the errors when you add them up. Your bank statement and records balances should then match.
Small business accounting software (e.g., QuickBooks, FreshBooks) will help to reconcile bank accounts. It will also save the cost of an accountant or bookkeeper fixing those errors.
- Separate personal and business expenses
Keep business expenses separate from personal expenses. Failure to do so can make you personally liable for business losses.
Review statements to ensure expenses qualify under your business. Set up business bank accounts and credit cards separate from personal accounts and cards.
- Collect T4 forms
Fill out a T4 slip for each employee you paid employment income or remuneration. Provide a T4 slip to employees on or before the last day of February of the following year. Use the T4A slip for independent workers who are not employees.
Note: There are other tax forms to submit (e.g., TD1, Personal Tax Credits Return). Some forms apply under specific circumstances. Talk to a tax professional to ensure you are up to date on what forms to include.
- Speak to a professional
You might want to catch up on bookkeeping yourself to reduce expenses. It’s advisable to have a chartered professional accountant (CPA) or tax professional. Review your books and filings. This will help to prevent costly errors and maximize tax deductions.
About Accountero
Accountero provides hassle-free, cloud-based bookkeeping services for Startups, small and medium-sized businesses. Our flexible plans scale with your business growth and needs. We can support you with a one-time cleanup of your books or ongoing bookkeeping services. Talk to us today about your bookkeeping needs.
Accountero is a tech-powered service provider offering bookkeeping, tax advisory and fractional CFO. Accountero is not a public accounting firm and does not offer services that require a public accounting practice license.