Keep personal and business expenses separate
As you are starting out your business, it can be tempting to use money from your business for your personal life or your personal money on your business. This is not recommended as it can complicate both your tax situation and your liability. Combining your expenses into the same account, and separating them wastes valuable time for your business. Even if you separate the expenses when they happen, it still wastes time.
It can also cause issues with where the liability lies if you have incorporated your business. Incorporating means that the liability for your business is separate from your own personal liability. Not separating your expenses makes this liability difficult to separate.
It is important to create separate bank accounts for your business and your personal expenses. Create savings accounts and chequing accounts for expenses you will need to pay over time and use the savings account to save for large expenses in the future.
Manage how you deal with documents
One way you can make managing your documents easier is to have a system for organizing and categorizing documents. Sorting the documents allows you to deal with them more effectively and also allows you to find documents much more quickly. If you haven’t started this process yet, it can be a daunting prospect to sort through all of your documents. Start with the most important documents first, the ones most relevant to your business right now. Then, if you keep organizing, you will find you have organized all your documents and have a system to quickly organize new documents as they come in.
Document categorization
Here is a list of some common categories for organizing documents.
- Accounts receivable
- Accounts Payable
- Bank Records/Statements
- Contracts
- Corporate Records
- Important correspondence
- Employee Records
- Permits and Licenses
- Stock/Investment Records
- Tax Records
Some of these documents can be stored in long-term storage or may even be able to be discarded as time goes on. For example, the government of Canada recommends that you keep your tax records for the previous six years from the end of the last tax year. But you may want to keep them for a bit longer than that suggested period of time.
Digital documents
Also, make use of good accounting software and digital filing systems to help you keep track of things. Being able to search through documents quickly allows quick access to those documents when you really need them.
Be consistent when you decide to file papers and record transactions. This will make managing these documents much more effective as you won’t need to rush to get things done before a deadline comes up. This includes better and less stress-free preparation of tax documents and other year-end documents. A better understanding also allows you to figure out tax deductions more effectively. Also, by managing these documents regularly you better understand how your company is performing and how to improve your business.
Plan major expenses
Major expenses you need for your business will come, from maintenance to new purchases. These costs may need to be planned years in advance. Saving money and setting aside money for these purchases is important to the health of your business. Expect that the equipment essential to your business will eventually fail. And also save for these expenses for up to five years. Also over the year your business may be affected seasonally, understand how your business is affected over the year and choose the best times to spend.
Taxes are something you need to manage every year. Saving money for your yearly taxes is also important for your business. It is also important to try and set aside money every month or quarter, whichever is more effective for your business.
Hire a bookkeeper
It can be hard managing, organizing, categorizing and sorting through all your documents. That combined with planning and saving for major expenses can take a lot of time. Our experts at Headquarters Inc. are here to help you with all of your bookkeeping needs. Find out how we can help save you time so you can run your business efficiently and also contact us today!