What takes only a couple of hours per month but can save you thousands of dollars per year? It’s not a riddle, folks - it’s solid bookkeeping!
Recording your business transactions and analyzing the numbers that come out the other end is one of the most powerful things you can do for your business at any stage. The sooner you start implementing good bookkeeping strategies and habits, the quicker you can spot areas of your business that could use improving. Having accurate, up-to-date, financial information on your business allows you to keep a constant pulse of the financial health of your business, and is key to maintaining viability over time. This can be anything from the prices of your products or services to your monthly operating expenses to how much you pay yourself each month.
Bookkeeping is not just something you must do to prepare for tax season and stay compliant(although that’s part of it). Bookkeeping is a commitment to meeting regularly with your money and seeing what it’s been up to.
In this blog, we will share with you some bookkeeping best practices that will set you and your business up for success.
Having solid systems in place can mean the difference between you running your business and your business running you. Without systems, you can quickly become stuck in a cycle of entrepreneurial chaos. The trick to making good financial habits stick lies in your systems. We are not talking about anything complicated here. You have to put two things in place to make regular bookkeeping a no-brainer and turn it into a habit that sticks.
1. A system for recording transactions
This is where the bulk of the work takes place. You need a place where you can record your business transactions. By a place, we mean a digital place. It can be something as simple as a spreadsheet or as sophisticated as an online accounting tool like Quickbooks. It all has to do with your comfort level. We found that many business owners appreciate the simplicity of a spreadsheet but also want to analyze their numbers. We built My Digital Bookkeeper to give you the best of both worlds. Grab it here.
Choose a solution that is aligned with the simplicity, or complexity of your business. The solution you start with does not need to be a lasting one, as many business owners feel comfortable getting started with a less complex system for bookkeeping in the early stages of business, and opt to move to a more sophisticated system later on if their business needs change.
2. A system for storing and organizing receipts
Keeping track of receipts from expenses and purchases you’ve made can quickly get out of hand if you don’t have a solid system in place to store and organize them. As tempting as it may be to tuck them away in a shoebox, we recommend a filing system, and/or a digital storage solution. The CRA accepts digital receipts of business transactions. So get in the habit of storing receipts and invoices in an accessible, organized, and preferably digital, place.
Some business owners opt for a hybrid approach where they file physical paper receipts in a physical storage solution like a filing cabinet but then keep any digital receipts received saved to their hard drive or cloud storage. Receipts for purchases should generally be stored either physically or digitally for a minimum of 6 years from end of the tax year that they relate to. However, if you file your taxes late you will have to keep them longer. Check out the CRA’s guidance on record retention HERE.
One more tip: if you are storing your receipts digitally be sure to have them backed up and stored in a common digital format like .png .pdf or .jpeg.
This is the hard part. This is the part where a lot of people fall off the wagon. Why? Because it involves behaviour change. As is the case in establishing any new habit, getting into the habit of regularly tending to your business finances can be hard at first. Luckily, the more you do something, the easier it becomes. Having a solid system in place is only effective if you are actually using it.
There are two main ingredients to making a new habit/routine stick:
We’re not going to lie - mindset is a deal breaker in any part of business and especially when it comes to money. This is the part in the story where you decide what type of business owner you will be. Will you be the wing-it and stress out at tax season business owner, or the business owner who’s proactively committed to staying on top of your numbers all year long.
Managing a business, and especially your finances within it, requires a certain level of discipline and accountability if you want to reap the benefits. Spend some time giving yourself a pep-talk in this area. If you are in a position where you’re feeling overwhelmed by messy books from years of neglect, just know that you can move forward from this. You just need the right tools and trusted guidance to get you there, and we promise it is possible.
2. Preparation & Scheduling
Just like prepping your meals for the week ahead is a good idea if you are trying to eat healthy or reach a health goal, being deliberate and organized with HOW you tackle managing your business money is key.
When sitting down to do your bookkeeping, start by creating a checklist of what needs to get done. For example, your checklist could include:
download bank statement
organize and upload receipt
pour some tea and light a candl
And more depending on the needs and complexities of your business
Keep this checklist handy and simply pull it up every time you sit down to do your bookkeeping. This way you won’t have to reinvent the wheel and worry that you forgot something.
We recommend scheduling time to meet with your money weekly and monthly. Your weekly check-in can just be making sure no bills are due and a quick check on bank balances. Book 30 minutes to do this, and bookmark your online banking logins for easy access. Your monthly meeting will be closer to the 90-minute mark and could include recording all your monthly transactions and reviewing the outputs to identify any areas of concern, and celebrate your wins! Pop those in your calendar as recurring events, and stay committed to keeping these dates. Your future self will thank you!
Good bookkeeping is good for business. It’s as simple as that. Besides sales, it’s probably one of the most high-leverage business activities when it comes to growing your business. Why? Because, when done correctly, it goes beyond simply organizing your receipts. It gives you real-time insights into your business's health and provides the clarity you need to make rock solid business decisions. Don’t skip it.
Interested in learning more from us? Follow along with us through our social media accounts (find us on Instagram @growcpa) and sign up for our newsletter for more educational and fun financial content.
Wishing you success in your business,
- Martina + Ashli
Date published: November 1, 2022
Disclaimer - The information provided in this blog is general in nature and solely for educational purposes. Readers use and implementation of the information comes at their own risk and is their own responsibility.