Your roadmap to small business bookkeeping

One of the best things about starting your own business is seeing those first few deposits hit your account. You did it! Your venture is making a profit! But have you considered how to reconcile your incoming and outgoing payments to vendors, for supplies, expenses, and employees or contractors?

If not, this is a great place to start. Bookkeeping is one of the most important aspects of your business, even if you don't think it's very fun. Here are the first questions you should ask yourself:

• Is my business making a profit yet, or do my costs exceed my incoming payments?

• Speaking of costs, where is that money going every month?

• Which products or services are bringing me the most value?

• Which could I discontinue or do less of?

• Is my business growing, stagnant, or shrinking?

• Do I need to change course?

Bookkeeping can also be a great forecaster of how your upcoming weeks and months will look. Bookkeeping helps you stay on top of payments, taxes, GST remittances, and can forecast your months ahead to ensure you have enough cashflow to cover everything.

In months with higher cashflow, you may be able to stock up on inventory at a lower cost, hire a new employee, explore a new revenue stream, and more.

One of the biggest reasons we emphasize good bookkeeping: Those pesky audits.

If the CRA chooses to audit you, having a great paper (or digital) trail of your bookkeeping makes things simple and easy and helps you avoid fines or penalties.

The biggest piece of advice we can give you? Separate business and personal. Nothing is messier than trying to make sense of business expenses mixed in among your personal bank accounts. All you have to do is open a separate account at your bank branch and treat the two like completely separate entities -- they are!

Once you've got a system in place for tracking all of your business transactions (a Google Sheet will do), these are some commonly used categories that are eligible business expenses:

Sales

Advertising

Bank Charges and Interest

Insurance

Subscriptions and Dues

Meals and Entertainment

Office Expenses

Professional Fees

Rent

Subcontractors

Telephone and Utilities

Travel

Vehicle Expenses

Wages and Benefits

Inventory

Furniture and Equipment

According to the Canadian Income Tax Act: in general, you can deduct any reasonable current expense incurred to earn business income.

If you need more advice, feel free to reach out to our team at info@onyxaccounting.ca.