If you’ve fallen behind on the bookkeeping for your business, don’t despair. You’re not alone.
One of the best financial tips I can offer to business owners is to get caught up as soon as possible. It’s daunting at times, but it only gets worse if you wait!
Remember the old saying that a stitch in time saves nine? Well, taking time now to get your bookkeeping tidied up will save you a lot of time (and possibly sweat and tears) at tax time.
If you ask any professional bookkeeper their financial tips for cleaning up the books for a business, this is what you’ll hear:
- Find all of the receipts that you have to date for this fiscal year. Perhaps you store everything in a box, drawer, or pile them on a metal receipt spike on your desk (yikes to those spikes! They are an old-school way to keep receipts chronologically organized but it’s definitely time to think digitally). If you aren’t sure where some of your receipts are, print out your business bank account and credit card statements for this reporting period. You can use those records to help you figure out what receipts you have and what you’re missing. Recording and properly coding expenses helps you (or your tax accountant) track and claim all of the deductions available to your business.
(Pro tip: There are apps that allow you to snap a photo of a receipt and upload it so that it can be linked to the corresponding transaction in cloud accounting software. Our preferred app is Receipt Bank. Once you start using an app, you will be amazed at how easy it is to keep track of financial transactions!)
- Review all of the vendor statements. Have you paid them all in full? Are you missing any? If you are missing invoices, you can contact those vendors and ask them to send another copy for your records. It’s important that all of these expenses are recorded so that they are included in your year-end financial reporting.
(Pro tip: When reconciling your vendor statements, there can be discrepancies on how your payment was applied by the vendor. When applying errors arise, save yourself time by providing detailed remittance advice/cheque stub when making payments to your vendors to ensure that they know which invoices you are paying.)
- Find all of the invoices you’ve sent to clients to date for this fiscal year. You need to reconcile the invoices you’ve sent with the payments you’ve received, making sure that the payments are linked to the proper invoices and the dates are correctly recorded. If you have invoices outstanding, you can then start emailing and calling customers to remind them they need to pay you. Another positive is that this also helps with your cash flow.
(Pro tip: Don’t hesitate to send a reminder to a customer that payment is due — or soon to be past due. Many people are so busy they forget or misplace the invoice. Just be friendly and firm.)
- Record salary and benefits information for employees and payments made to contract workers. You’ll want to have all of the pertinent information ready for your tax accountant in plenty of time for tax season. Even if your year end is different from the calendar year end, you will need to have all of this information compiled by calendar year for T4 employees and a T4A for contractors.
(Pro tip: Having a software program process and keeping track of source deductions and completing relevant reporting — Payroll Tax Remittances, T4, ROE, etc. — can save you a lot of time and energy. There are also various third party payroll providers that can provide this service for you as well.)
- Convert to cloud accounting. When you store everything digitally, the efficiency of cloud accounting software will astound you — as will the financial reporting available through most online accounting programs.
(Pro tip: You don’t have to figure out cloud accounting on your own. We’ve helped many businesses convert to cloud accounting successfully!)
- Once you catch up, stay on top of the bookkeeping. It’s much easier to maintain your bookkeeping regularly than it is to tackle it and figure it all out every few months (or once a year in a crazy rush before tax time!).
(Pro tip: Having up-to-date financial records allows you to see how your business is performing and makes it easier to obtain funding.)
If getting caught up is a lot more work than you can afford to take away from other aspects of running your business, that could be one of the signs that you need a virtual bookkeeper.
Contact us at Finatics Accounting Solutions for a free consultation. We can help you maintain consistently clean financial records, successfully transition to cloud accounting, and achieve your business goals.