Small business makes up the backbone of our Calgary community and we understand as business owners ourselves that if you haven’t kept up with your bookkeeping in a few months, or even years, it can be a nightmare to get started. It’s a task that’s often pushed to the back of the desk, and if left unchecked, that tiny task can add up to a huge pain come tax season. 

As a business owner, you have plenty of other duties to stress about, catching up on a mountain of bookkeeping during tax season shouldn’t be one. That’s why we put together this helpful guide to help you get a leg up on your bookkeeping this tax season so you can stress less about your year-end.

First Things First, Accounting Methods

The accounting method you choose for your business will determine how you maintain the records of your business’ transactions for your fiscal year. For a more in-depth look at our breakdown of accounting methods, check out our write up here. Simply put though, the two main accounting methods to know are Accrual accounting and Cash accounting.

Once you’ve selected your accounting method, it’s onto the first step!

Step 1 – Selecting The Right Accounting Tool

Once you’ve established the foundation of your taxprep and selected an accounting method, next you will need to select the best tool for the job. There are many ways to approach maintaining effective records of your books, from completely DIY in Excel to turn-key application support.

As a Calgary tax accountant, we recommend to all our local clients to migrate to an online accounting software solution whenever possible. The online solutions today not only make accessing, tracking, and measuring your accounts incredibly streamlined. Online accounting tools also allow you to access your records wherever you need them, have strong data security complete with backups on multiple data centres, and allow for seamless collaboration in the instance of multiple parties managing the same books (ie. your employees, bookkeeper, etc.).

Some of our top recommended cloud-based accounting platforms include Quickbooks, Freshbooks, and Xero; however, we recommend you look into what current plans are currently offered by each platform and what long term solutions best suit your business needs.

If you’re making your first steps to new software for your Calgary Accounting, you’ll need to first make sure to import the closing balances from the last time you updated your books. Once your balances have been transferred over, we recommend setting up the appropriate tax codes for your business. Then finally, add in all of your products and services, and voila! You’re all set on your way to more efficient bookkeeping!

Step 3 – Gather Your Receipts & Tax Documents

The next step for your Taxprep is to collect all the necessary documentation for your tax records. There are several types of documents small businesses are required to collect. Those are:

• Customer Invoices
• Vendor Invoices
• Business Expenses
• Bank Statements

Customer Invoices

Starting with your customer invoices, these documents are all the invoices you have issued to customers for products and/or services that you have provided. These invoices should include:

• Your Business Information (Name, Address, Contact, Logo, etc.)
• An itemized list of the products and/or services you provided
• The amount charged for those products and/or services
• and lastly, the amount of sales tax charged (Make sure to also include your GST/HST tax account number on the invoice as well when charging tax)

Vendor Invoices

Next are your vendor invoices for services or business you have done with them. In some cases, specific vendor invoices may offer reduced payment options when you pay within a certain time frame. It’s ideal to review the payment terms and keep those options in mind whenever available.

Business Expenses

Business expenses are all the receipts you would have collected over the year for daily purchases such as office supplies, team lunches, and tools. If these purchases were done so on a business credit card, you will still need to keep track of all receipts as proof of your payment. Nowadays, most cloud-based bookkeeping offer apps that allow you to take photos of these expenses and track them on the fly. This means no more sifting through big piles of receipts for those business owners who have run into issues of misplacing receipts in the past.

Bank Statements

Lastly, you will need to gather your bank and credit card statements for the business period you are reporting on. If you are using a cloud-based accounting system, most software will allow you to link your bank feed and download the history of your business’ transactions. However, be wary of what your bank account will allow for reporting your feed. In most cases, bank feeds will only provide records for up to 90 days, so you may need to download a .CSV file from your account instead.

Step 4, Categorize Your Transactions

Now that you have all your appropriate documents collected, it’s time to upload all your bank transactions to the tracking method of your choice. First, you will want to upload your bank transactions in order to make sure you do not miss any necessary transactions in your books. This should be possible once you download the .CSV file from your bank’s account.

Next, you will want to upload and categorize all of your receipts and invoices as transactions, categorizing them if you have not already done so. You can then start to match each transaction to your bank feed, and this approach will differ depending on which method of accounting you decided to use.

If you are using the cash accounting method, you will first match all your deposits with your sales invoices and code them as revenue. As well as match all your expenses with withdrawals and code them to the appropriate expense accounts.

If you are using the accrual accounting method, you will need to record when the product or services was delivered and when the expense incurred. To track your revenue, you will first record all your sales invoices and then match all your deposits with your sales invoices. Then for your expenses, you will record all your bills and expenses, followed by matching all your paid bills and expenses with your withdrawals.

Step 5, Reconcile Your Accounts

The final step in your taxprep is reconciling your accounts. Now that you have successfully coded every transaction, pairing them with the appropriate bank transactions, you can easily reconcile your bank/credit card accounts for every month. This can be done by selecting the account you wish to reconcile, entering the ending balance and date as per your statement, and then matching each withdrawal/deposit on the statement with the appropriate transaction. In the end, the difference between your ending balance on your bank statement and the account should equal $0.

Now depending on your accounting method, the ending balance and date on your statement will differ.

If you are using the Cash Accounting method, you will only record a transaction when money has entered or left your account. Therefore the ending account balance should automatically match the ending balance of your bank and credit card statements.

If you are using the accrual accounting method, your statements may not pair up as seamlessly based on the timing of the transactions. This may be due to outstanding cheques that have been recorded as paid but not cashed yet or outstanding deposits that have been received but not cleared by the bank. In order to make the appropriate adjustments, you will need to take your ending account balance on the desired month and match it with the ending balance on your bank statement, plus your outstanding payments and minus your outstanding deposits.

Congratulations, Your Small Business Accounting is All Caught Up!

Now that your accounts are all reconciled, you can run all the necessary P&L statements and balance sheet reports for your accountant to review. Having your bookkeeping nice and tidy also comes with the added benefit of greater visibility into the profitability of your business! With up to date books, you are able to apply for loans, create cash flow forecasts, and develop a clearer budget for your business.

We understand for Calgary business owners time is precious, and having a reliable tax accountant near you can be priceless in your day to day operations. That is why Headquarters Inc. is available to provide the best Calgary bookkeeping and accounting services around. It is our goal to help grow businesses and entrepreneurs in our community. 

If you are looking for more support in your business’ taxprep and bookkeeping in Calgary, please reach out today and we’ll be happy to provide you with effective solutions to get started.