Running your own business can be an extremely rewarding and fruitful experience. However, there are several activities that can trouble even the most experienced business owners. One of the biggest struggles small business owners deal with is their own bookkeeping. In this blog we will talk about how to set yourself to keep your finances and cashflow on the right track.
There are a couple of different options for bookkeeping as a business owner. You can either choose to hire a bookkeeper or do it yourself. If you do decide to hire a bookkeeper, be sure to discuss your expectations up front to be sure your deliverables are what you need to keep your business running smoothly.
It doesn’t matter if you hire someone or DIY, the first major step is to stay organized. Whether you record all revenues and expenses digitally or keep hard copy receipts and invoices, it is helpful to organize them by vendor and client. These receipts and invoices should be recorded into your ledger weekly, so they don’t pile up. When recording to your ledger, try to keep the entries as detailed as possible. Another reason to stay organized even if you do choose to hire someone, is the additional expense you will incur from the bookkeeper if not. You will end up paying them for their time as they will need to sort your files for you.
Something to be aware of when making a business-related debit/credit purchase, is to ensure you collect both the payment receipt and receipt of purchase. This way you have proof of valid purchases and the HST breakdown. This way, you can track the entire transaction which is important to the CRA.
In addition to recording all expenses and revenues, set up a second schedule where you reconcile your bank at least twice a month. A reconciliation is the process of confirming that the information in your accounting software/ledger, matches the expenses and revenues in your bank account(s). If your cashflows are very tight, you should be doing this even more frequently. By reconciling frequently, you can catch errors or missed payments early, before larger issues arise.
If you are interested in learning more, check out The Atlantic Association of CBDC’s for a beginner training course on financial literacy.