Halton Region Small Business Centre
Visitors to the Small Business Centre often ask how to get started with record keeping. In many cases a simple system created by the entrepreneur can work well. This is especially true when the business will be a consulting practice or other service based business where there will be a relatively low number of transactions.
While there is no one correct way to keep records for income tax purposes, it is important that you create a system that is repetitive, predictable, and accurate. At the end of the year you want to know your books are complete, you can accurately declare your revenue, and are confident that you can find any receipt to prove your expense.
Here are three options to get started with keeping records. All three of these suggestions may still rely on an accountant, qualified bookkeeper or other tax professional to prepare your year-end return.
DIY Manual System
Many new businesses with simple transactions will establish a system that involves file folders, excel spreadsheets and sometimes software specifically for invoicing. They establish a process to make sure their receipts always get placed in a proper file, and tally their totals just in time to do their taxes.
DIY Accounting System
It is possible to share a file from popular accounting systems such a QuickBooks with your accountant. Advancements in technology have also made accounting software more accessible and customizable through cloud services.
This option relies on the business owner establishing a routine for creating their invoices directly in the accounting system and to set time aside to input their expenses.
Full Service Bookkeeping
Some entrepreneurs prefer to “Do what they do best, and outsource the rest”. (See our Feb 10th blog ). This option involves packaging all of your paperwork either monthly or quarterly and sending to a bookkeeper. The bookkeeper then makes journal entries, reconciles bank statements, and prepares in-term financial statements. It is likely that you will still need a daily tool for creating and tracking invoices (you wouldn’t want to do this only once per month).
While all of these options can work, one thing is for sure, a shoebox of paper will most certainly lead to stress and unnecessary expense come income tax filing time. Remember – it’s easier to keep up than catch up.
For more information about Halton Region’s Small Business Centre resources, services, business events and seminars, contact us by dialing 311, 1-866-442-5866, visiting us online at www.haltonsmallbusiness.ca, by email at firstname.lastname@example.org or visit us at 1151 Bronte Road, Oakville. You can also follow us on Twitter and find us on Facebook.