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    Receipts and record keeping: What to keep and how to organize

    As a small business owner, bookkeeping is an essential part of your business. But recording and categorizing all of your business transactions when you’re focusing on building a successful business can sometimes feel overwhelming (and this is when we start to see shoeboxes stuffed full or receipts). But don’t sweat the small stuff — we’re here to simplify this fundamental aspect of your business. We leverage technology to make bookkeeping more accurate and efficient, which means we can see every write-off available to you. And, we’ll import your bank and credit card transactions into Xero and categorize each and every one for you. Now doesn’t that sound easy?

    Here are a few pointers on what you need to keep and store: 

    1. First, separate business and personal bank expenses
    2. Keep your receipts
    3. Download your bank statements
    4. Track your non-bank expenses
    5. Digitize your paper records
    6. Pay yourself — the right way


    VIDEO: Caitlyn at True North Accounting shares tips for organizing your small business receipts.


    Separate business and personal bank expenses

    Make sure you keep your business and personal bank transactions separate. This includes recurring payments and the card you use when you’re paying for anything. Keep business credit and debit cards for business expenses; personal expenses should come out of your personal account. 

    This may seem like an extra step, but consider this: If you always keep your business and personal expenses separate, your bank statements will be an exact record of your business. This saves you time and effort in the long run. 

    What about credit card points?

    Personal credit cards score you more points, but they complicate the record-keeping process. We recommend getting a company credit card, even if the points program might not look as good.

    If you must use a personal credit card (i.e. you can’t get a credit card for the business), then designate one personal credit card to be used exclusively for business expenses. 


    Keep your receipts

    We don’t need to see them, but you do need to keep every business expense receipt for seven years. A physical copy works, but we recommend making a digital copy as well. 

    Why? If you’re audited, the CRA will request two things: 

    1. Proof of purchase (receipt) 
    2. Proof of payment (bank or credit card statement)

    So, make sure you have both. Oftentimes, they’ll ask for your bank statement and request 10 receipts from your list of expenses. 

    We’ll need to see receipts for anything that will be considered an asset of the company: equipment, vehicles, computers, etc. We’ll also need to see any transactions that are unusual, significant, or paid by cash or personally.


    Download your bank statements

    Your bank and credit card statements are the records of your business activities. You’ll want them on hand if you ever hear from the CRA. Here’s how to make sure you have the records you need:

    • Save PDF statements for all bank accounts and credit cards. Hubdoc can do this for you automatically (we’ll discuss more about this below).
    • Regularly save your e-Transfer history. (Usually, you can only search back six months, so make sure you do this often.)
    • If you’re claiming a home office, you’ll need a record of a few things from your personal accounts: mortgage statements, and your bills/record of payment for your electric, gas, water and internet.


    Track your non-bank expenses 

    (This includes home office expenses, vehicle expenses, owner draws and unusual purchases.) 

    Our home office expense worksheet has templates for home office, vehicle expenses, owner draws/injections, e-Transfer history and unusual items. It’s a good idea to update this document on an ongoing basis throughout the year.

    Track any expenses that you’re not 100% sure about on the Unusual Items tab. This includes equipment purchases, conferences, concert tickets, etc. Record all the details you have and we’ll go through them at the end of the year. 

    Also be sure to check out our tax grey areas blog post for more on home office and vehicle expenses. 


    Digitize your paper records

    There are lots of great apps for scanning and storing any paper documents you have (bills, receipts, etc.). Some of these apps have OCR (optical character recognition) and will sort and file your documents for you. Others are just a scanner for your phone — with these, you’ll need to transfer receipts to the right place and organize them yourself. 

    Categorize your digital and/or analog files into the following categories: Personal tax, business receipts, insurance, bank and credit card statements, CRA communications, medical, house, and personal. We’ve got a full home office organization how-to including a fully colour-coded system, suggestions for naming digital files and recommendations for a life binder. 

    Hubdoc is an excellent OCR software for keeping track of financial records. Create a Hubdoc account, and you can snap a picture of the receipt and import it right to your account. Hubdoc will also retrieve recurring bills and statements delivered to your email address. Dext is another useful OCR option. 

    If you want to create your own system, you can scan with Scanbot, then file to folders you’ve created in Dropbox or Google Drive. 


    Pay yourself — the right way 

    Our year-end calculation spreadsheet has a tab to track owners’ draws and cash contributions. If you’re taking dividends, you can use it to track the draws of each shareholder during the year and capture any shareholder cash injections.

    Unsure whether you want to take dividends or wages? Use the spreadsheet to track all your draws, and then we can have that conversation in the weeks leading up to your year-end. 

    You can also take an annual wage (or a once-a-year bonus) and claim it as a wage — you’ll just need to make a CPP payment by the 15th of the month following your year-end. For example, if your year-end is September 30, make that CPP payment by October 15. 

    If you’d like to do monthly or quarterly payroll, reach out and we can help get you set up.


    Recap: What not to do when tracking your expenses

    • Don’t create a spreadsheet to track all your expenses — you’ll spend time doing something that doesn’t really add value.
    • Don’t use cash to pay for business expenses.
    • Don’t use the company card to buy your own lunches.
    • Don’t use the company card to pay for your gas if you personally own your vehicle and are claiming kilometres. (The 2022 CRA mileage rate is $0.61 per kilometre for the first 5000 km driven and $0.55 per kilometre after that.)
    • Try not to withdraw cash from your business account. If you do, enter it into the Unusual Items tab on this worksheet.
    • Don’t send and receive hundreds of Interac e-Transfers without any backup or way to identify what they’re for. Download this history every six months. 


    Please reach out if you want to talk more about True North Accounting doing your bookkeeping. And check out these Bookkeeping topics that may be helpful to you and your small business. 


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