Bookkeepers and Accountants Are Not the Same

Your successful small business needs both a bookkeeper and an accountant. And there’s a reason why they won’t be the same person.

While some skilled bookkeepers and accountants may, in fact, be capable of doing each other’s work, an accountant’s services cost considerably more than a bookkeeper. There are other significant differences to be aware of.

A bookkeeper helps you maintain the ongoing financial recording of transactions to keep your business running smoothly. Specifically, they might:

• Process and record invoices, receipts, payments, and other transactions
• Process transactions for payroll and maintain those systems
• Set up, maintain and review accounting systems and processes

Some bookkeepers (including me) may also look after these additional activities for you:

• Reconcile accounts and prepare reconciliation reports
• Manage accounts receivable and accounts payable
• Prepare working financial statements

An accountant, on the other hand, provides analysis and professional advice, and keeps you compliant with laws and regulations. Specific activities which an accountant might do are:

• Analyze performance and create financial projections
• Provide tax advice and planning
• Help with new business set-up
• Audit records for compliance
• Prepare financial reports
• Give financial management advice

Both roles are extremely important to the success of your small business. They need to communicate well with each other in order for you to maximize on their contributions.

Are You Unknowingly Part Of The Underground Economy?

"Can't I just pay my employees with cash?" We still hear some version of this question now and then.

Moonlighting or "working under the table" is the basis for the underground economy in Canada. According to the Canada Revenue Agency (CRA), this can include:

bartering, failing to file tax returns, omitting an entire business activity from your tax return, skimming a portion of business income from what you report on your taxes, and not reporting a portion of employment income, like tips and gratuities.

CRA is actively searching for and fighting these activities. Click here to read more about this important topic.

If you aren't sure if your small business might be unknowingly contributing to the underground economy, stop now and give it some serious consideration.

Do you have questions about how to set up your small business so you can keep yourself safe? Get in touch.

Beyond Data Entry

It’s good you’ve invested in having someone (an employee or a contractor) dedicated to doing your routine entry of invoices and vendor payments. You’re too important to your business to do that stuff yourself.

Now that you aren’t seeing all the details, though, you might be finding it more difficult to make decisions about day-to-day operations and expenses.

Perhaps there’s another role you need to fill: someone to do your payroll, reconciliations and monthly financial statements. If you have a qualified, experienced person looking after these activities, they can help get your head out of the trees and help you see the forest… with valuable insight on how your business is doing. A good person in this role will notice concerning trends and bring them to your attention before they become a problem.

Where can you find such an experienced person? Ask me... or your accountant.

Don't Mix Business with Personal

Here are 3 reasons why keeping your personal and business finances separate will also help keep you and your business healthy.

Finding, tracking, posting, filing, and reconciling your bank, credit card, and PayPal accounts - paper and electronic - becomes much more onerous and time consuming. You'll often have to chase down personal statements and dig through old purses for receipts to explain debits and credits. If you wait too long, the disappearing ink will confound your efforts even more. All of these things are guaranteed to make you feel overwhelmed.

Accurate information about your expenses on a regular basis will help you make better business decisions, otherwise you're flying by the seat of your pants. When your business and personal finances are muddled, you won't have a clear picture until tax time. Once a year is not the only time you need to make decisions. Inaccurate information can cause insecurity and indecision, detrimental to small business success.

If you keep your finances separate, you'll also find tax season much less stressful. Since less stress is good for your health, keeping personal and business systems separate also contributes to a healthy lifestyle. The impact of "tax stress" can be more than you might think.

If you are already suffering from these accounting ailments, get in touch. Untangling messes is one of my specialties.

5 Resolutions for Your Bookkeeping New Year

We all make promises to ourselves that in the New Year we will do things better. Here are 5 worthwhile activities that will make your accounting processes easier for yourself and your bookkeeper. These are all quick to implement or easy to stick to.

#1. Log all the important dates in your calendar.
This only takes a few minutes and might include dates for payroll input, Canada Revenue dates for HST filings, corporate income tax filings, and even personal income tax filings. Acting on these dates in a timely manner will keep your bookkeeper happy and ensure your books stay up to date!

#2. Book an appointment to see your accountant.
Do it now and meet soon. This will allow you to review how you did financially in 2016 and if there are any tax breaks you can take advantage of before filing your tax returns.

#3. If you are a person who lives with spreadsheets and tracks your expenses that way, STOP.
Get bookkeeping software to manage your revenue and expenses. Need help figuring out which application would work best for you? Please call me!

#4. Put a simple filing system in place and ditch the shoebox.
Does a box sit in the corner with receipts in it waiting to be sorted? Take just a little time to put an organized system in place - it will reduce your stress!

• In a file box or file drawer, place file folders labelled for each month of the new year. This way, your receipts will be sorted by month at the end of the year.
• If those receipts relate to bank statements or credit card statements, match them up as you go and staple them to the back of the statements. It's a great way to know if you are missing something!

#5. Finally, pay attention to your financial statements. They tell a huge story about how your business is doing. If you need help understanding these reports, give me a ring!

File HST Returns even for Zero Sales

After you register for an HST number when setting up your business, you are required by law to send in your remittances even if you have zero sales.

When you start a business, unless you are expecting sales right away, or under $30,000 in sales for the first year, you do not need to register your business to collect HST. When you do decide to register, here's a story you should know about.

A recent client of mine had registered their business two years ago with the intention of proactively looking for business. This client had not had any sales in those two years. However, when they called CRA to register for HST, the start date was backdated instead of beginning when he called. We are uncertain why. This client was then responsible to file returns for the previous reporting periods. Because they didn't know this, CRA assessed him for what they believe they owed them. They received a bill in the mail they were expected to pay. When they finally realized they had to file all the returns backdated, they filed all of the zero returns so they could claim HST on expenses they had incurred for the start up. Because they hadn't filed previously, CRA took their credit and applied it to the outstanding amount. When they called asking why they owed money on a zero sales return, CRA said it was because of the penalties for not filing his returns!

Lessons learned?

1. Always file your HST returns, even if there are no sales!
2. When calling to set up an HST account number, ensure they date the paperwork for the date you are applying. Keep an eye on the mail and check for confirmation of the reports due.
3. Although it does look professional when you charge HST, unless you are over the $30,000 mark in revenues there is no point in registering before you are ready unless you want to claim HST for expenses.

Just Because You Know How to Do Your Own Bookkeeping...

Are you still insisting that you do your own bookkeeping because you know how?

It is imperative that you maintain a current set of books. Canada Revenue Agency can audit you at any time with little notice. If you are not keeping up, think about the things happening around you that are causing you such unnecessary stress.

CRA is likely hounding you because you haven't filed last year’s taxes or, worse, HST and payroll remittances. They have likely decided to send you an assessment of what they feel you owe and it is due just like any other bill.

Your cash flow is suffering and now you need to take a loan out to cover expenses until your backlog of receivables and payables are cleared up. But, wait, you don't have any statements to show the lender. Your accountant is telling you to hire a bookkeeper if you can't keep up... in the end causing much stress and money that didn't have to be spent trying to get things caught up.

You haven't reconciled your bank accounts in months. Oopsie, was that an NSF charge on the last statement?

Your vendor won't ship your orders because you haven't paid for the last few. You swear you did but can't prove it.

Your clients are loving their extended credit terms! (Good for them, not you.)

Does this sound familiar? Don't try to be the expert in everything. Very few people can handle everything in a timely fashion and they are normally those workaholics we never want to be.

Just because you know how to do your own bookkeeping, doesn't mean you should.

Did You Know Your Receipts are Disappearing?

As a business owner you are required by the Canada Revenue Agency to provide records of all the transactions of your business for 7 years. They must be kept in a secure and accessible place.

Ever notice those nasty receipts printed on thermal paper that fades after a few months? Well, CRA does not care; it is you that still needs to provide proof of that receipt. All those tricks you try that Google tells you about may not work well. So what can you do?

With technology the way it is today, we don't have any excuses. You need to decide what works best for you as an individual. There are many apps, both free and for a charge, that you can use on your smartphone. These apps will take a picture or scan of your receipt and keep it either in the cloud or downloaded to your computer. Some online accounting programs have a mobile app that lets you actually store the receipt and input the information related to the receipt directly into your bookkeeping software. One such program is Quickbooks.

I have experimented with a few of these apps - Neat, Expensify, and Receipt Scanner by Num Receipts Inc. - but I don't have a preference.

Don't have a smartphone that can provide you with access to these apps? No worries, there are lots of small receipt scanners out there that you can attached to your computer via bluetooth or USB.

If you have found a great tool that works for you, please share!

Are You in Danger of Missing Your Business Income Tax Deadline?

Do you know when you are required to file income tax returns for your business with the Canada Revenue Agency (CRA)? The following is a guideline to use to make sure you file in time to avoid penalties.

If you are a solopreneur or self-employed, the deadline is June 15th whether you owe tax or not. If you owe, you should pay by April 30th to avoid interest. Keep in mind that if the date falls on a weekend or holiday, it is due the following business day. This also becomes the effective date for any spouse or common-law partners as they are unable to file without your income. There are many software applications online for free to file these returns. Keep in mind that the software won’t know all of the tax benefits you can take advantage of. For this you need the advice of an expert.

If you are a corporation, you must file your tax return within 6 months of your corporate year end, however you should pay within 3 months to avoid interest. So if your year end is December 31, you must file by June 30. If your company owes tax and you don't have the funds to pay it off, file anyway! If your filing date ends on a weekend or holiday, it is due the following business day.

For information on penalties, refer to the CRA website. In short, you want to avoid these.

Keep in mind, no matter what type of business you have, you must keep your records for 7 years in good order in case the CRA decides to audit you. Having systems in place for records is imperative.