Most businesses will be scrambling to start or complete bookkeeping when the end of the year is near. Bookkeeping should be performed throughout the year to avoid the last minute dash and to ensure the business is on a sound footing.
Bookkeeping is the process of recording taking of the day to day transactions of a business. All transactions including receipts, sales and payments should be properly recorded. Engaging the services of a bookkeeper will ensure all entries are made and proper records are generated. The bookkeeper will also help the business owner to make sound decisions throughout the year.
Reasons for Proper Bookkeeping
- To Have Proper Records As Per The Law
The law stipulates that as a business owner, you are responsible for:
- Protecting your records even when you work with a third party.
- Availing your records and any supporting documents to the CRA when necessary. The CRA has the mandate to audit, inspect and examine business records and even your business processes and property.
- Ensuring that you are present as well as your employees and third-party bookkeeper when CRA official come to examine your records at the address provided.
- Ensuring your representative cooperates by providing reasonable assistance and answering any questions asked about the business.
- Permitting CRA officials to make copies or provide copies of any required records.
- Avoid CRA audits
With budgetary increments to the CRA to facilitate taxpayer audits and compliance programs, you will not want to avoid the audits. Proper bookkeeping is one way of avoiding the taxpayer audits. Failure to have proper records will serve as an audit trigger and could have the CRA visit your business.
- Enjoy Business Deductions
Without proper bookkeeping, you might end up overlooking legitimate business deductions. The CRA will fail to authorize deductions if you do not keep proper records. Maintaining a well-designed bookkeeping system will help in paying less in taxes through legitimate business deductions.
- Separate Business And Personal Expenses
Personal expenses should never be recorded as expenses in the business. It presents a common mistake that leads to needless hassle, work, and confusion. Personal expenses cannot be claimed as a business deduction. Avoid getting your business audited by the CRA and they find personal expenses claimed as business deductions since it will lead to increased taxes in addition to penalties and interest.
- Better Financial Management and Analysis
Proper bookkeeping helps the business owner to know how well the business is performing financially. Bookkeeping will help in the generation of a basic balance sheet and income statement that will let the business owner know if the business is on the right track financially. Monitoring of cash flow in a business is a critical endeavor. A business will suffer if supplier invoices are unpaid or customer payments are not received. Proper bookkeeping helps to manage any cash flow problems.
- Timely Fulfillment of Tax Obligation
Businesses have a number of statutory compliance tax filings to make including tax returns, payroll remittances, PST returns, and T4 and T5 slips. Proper and up-to-date bookkeeping will make sure all tax filings are finished in a timely and proper manner to avoid penalties.
- Attract Potential Investors
The bookkeeping process must be done properly especially if you are seeking potential investors or seeking a bank loan. It is an indication that you are organized and that you can easily provide all requested financial information.
Envolta, are qualified bookkeepers in Ottawa who provide professional bookkeeping services for many different businesses. Proper bookkeeping is critical for the success of your business and will effectively save you thousands of dollars.