As a small business owner, you’re juggling a lot. You’re building your business, keeping clients happy, managing employees and trying to stay on top of the numbers. Bookkeeping might not always be at the top of your list, but keeping your receipts, expenses and financial records organized can save you a lot of time and stress.
Bookkeeping doesn't have to be complicated. With a few simple systems and the right tools, you can keep your business expenses organized throughout the year, make tax time easier and make sure you're not missing potential write-offs.
At True North Accounting, we use technology to take the guesswork and a lot of the manual work out of bookkeeping. By syncing your bank and credit card transactions into Xero, we can do the heavy lifting and help make sure your transactions are categorized correctly.
Here are a few practical tips for keeping your receipts, expenses and other bookkeeping records organized.
- Separate business and personal expenses
- Keep your receipts
- Download your bank statements
- Track your non-bank expenses
- Digitize your paper records
- Pay yourself the right way
VIDEO: Caitlyn at True North Accounting shares tips for organizing small business receipts.
Separate business and personal expenses
One of the first steps to clean bookkeeping is keeping your business and personal transactions separate.
Use dedicated business credit and debit cards for your business purchases and personal accounts for everything else. It might seem like an extra step, but it makes reconciling your accounts much easier and gives you a clearer picture of what is happening in your business.
It also makes things much easier when tax season rolls around.
What about credit card points?
Personal credit cards often come with some pretty tempting points programs.
But using a personal credit card for business purchases can complicate your bookkeeping. We recommend getting a company credit card and using it for your business expenses.
If that's not an option, designate one personal card strictly for business use. This will make it much easier to track your receipts and reconcile your accounts.
Keep your receipts
Your receipts are an important part of your bookkeeping records. They show what you purchased and help support the business expenses you're claiming.
The CRA generally requires you to keep your records and supporting documents for at least six years from the end of the tax year they relate to. We recommend keeping your records for six years to give yourself a little extra room.
You don't need to keep every receipt in a filing cabinet forever. Digitizing your receipts makes them much easier to organize and find when you need them.
If the CRA audits you, they'll generally want to see two things:
- Proof of purchase: your receipt
- Proof of payment: your bank or credit card statement
So don't just save the receipt. Keep the financial record showing how you paid, too.
You'll also want to keep receipts for anything considered a company asset, such as equipment, vehicles, computers, and other significant purchases.
It's also a good idea to keep documentation for unusual or significant transactions, especially anything paid in cash or from a personal account.
Download your bank statements
Your bank and credit card statements are an important part of your bookkeeping records. Make a habit of downloading and saving them regularly rather than waiting until the end of the year.
Tools like Hubdoc can help automate this process, so you don't have to spend your time downloading and organizing every statement yourself.
Don't forget your e-Transfer history
If you use Interac e-Transfers for your business, save your transaction history regularly.
You can usually only search back a limited amount of time through your online banking, so don't wait until year-end to do this. Download your history at least every six months, and keep a record of what each payment was for.
This is especially important if you're sending or receiving many e-Transfers. A list of transactions without any explanation isn't very helpful six months later.
Working from home?
If you claim home office expenses, you'll also need records for some expenses that are paid through your personal accounts. Depending on your situation, this could include mortgage statements and bills or records of payments for electricity, gas, water and internet.
Keep these records with your other financial documents so they're easy to find when you need them.
Track your non-bank expenses
Not every expense will show up neatly on your business bank statement.
This includes things like:
- Home office expenses
- Vehicle expenses
- Owner draws
- Owner contributions
- Expenses paid personally
- Cash purchases
- Unusual or significant purchases
Our home office expense worksheet includes templates for home office expenses, vehicle expenses, owner draws and contributions, e-Transfer history and unusual items.
The best approach is to update it throughout the year. That way, you don't have to try to remember what happened when you're sitting down with your books months later.
Keep track of the unusual stuff
Not sure whether something is a business expense?
Use the Unusual Items tab in your worksheet to keep track of purchases you're unsure about. This could include equipment, conferences, concert tickets or other expenses that don't fit neatly into your regular bookkeeping categories.
Record the details and we'll review them with you at year-end.
If you're not sure whether something is a business expense, it's better to keep the information and ask than to leave it out completely.
You can also check out our blog post on tax grey areas for more information about home office and vehicle expenses.
Digitize your paper records
With so many apps available, there's no need to let paper clutter take over. Tools like Hubdoc and Dext can help you digitize and organize your receipts automatically.
If your business has employees making purchases or you're looking for a more streamlined way to manage spending, Float is another tool worth considering. It combines corporate cards, expense tracking, bill payments and receipt collection in one platform, and syncs with Xero to help keep your bookkeeping organized.
Prefer to do it yourself? A scanner app like Scanbot can turn paper receipts into digital files that you can organize in Dropbox, Google Drive or another system that works for you.
For your digital and paper records, we recommend keeping things simple and using categories such as:
- Personal tax
- Business receipts
- Insurance
- Bank and credit card statements
- CRA communications
- Medical
- House and personal
You don't need a complicated filing system. You just need one that makes sense to you and that you'll actually use.
We've also put together a complete guide to organizing your home office and personal records, including a colour-coded system, suggestions for naming digital files and recommendations for a life binder.
Pay yourself the right way
If you're taking money out of your business throughout the year, keep track of your owner draws, dividends and any cash you contribute to the business.
Our year-end calculation spreadsheet can help you keep track of these transactions throughout the year. When it comes time to review your year-end numbers, we'll have a much clearer picture of what you've taken out of the business and can help determine the best way to pay yourself.
Not sure whether to take dividends or wages? That's something we can help you work through based on your business and tax situation.
You can also take an annual wage or once-a-year bonus and claim it as a wage. You'll need to make the applicable CPP payment by the 15th of the month following your year-end. For example, if your year-end is Sept. 30, the CPP payment is due by Oct. 15.
If you'd rather run payroll monthly or quarterly, we can help you set that up, too.
What NOT to do when tracking your business expenses
Here are a few bookkeeping habits we'd recommend avoiding:
Don't manually enter every expense into a spreadsheet. It's time-consuming and error-prone. Connecting your bank and credit card transactions to your bookkeeping software can take a lot of that work off your plate.
Avoid using cash for business purchases when possible. Cash transactions are harder to track and match to your records.
Don't use the company card for personal expenses. Keep your personal and business spending separate.
If you claim kilometres for vehicle use, don't use the company card for fuel. Keep your vehicle expenses consistent with the way you're claiming them.
Try not to withdraw cash from your business account without documenting it. If you do take out cash, record it in the Unusual Items tab on your worksheet so you know what it was for.
Don't send and receive hundreds of Interac e-Transfers without keeping a record of what they're for. Download your e-Transfer history regularly and keep the supporting information.
Make bookkeeping easier throughout the year
A little organization throughout the year can save you a lot of time when it comes to tax season.
Keep your business and personal expenses separate. Save your receipts and statements. Track expenses that don't automatically flow through your bookkeeping software. And make a note of anything you're unsure about.
Then, when it's time to review your books, you won't be trying to remember what happened six months ago.
Bookkeeping is one of those things that's much easier to stay on top of than to catch up on.
If you need help getting your small business bookkeeping organized, we're here to help. At True North Accounting, we can review your current setup, identify where you can save time, and set up a bookkeeping system that works for your business.
Reach out to us to learn more about our bookkeeping services and get your numbers working for you.
Looking for a simpler way to manage business spending?
Our partner Float brings corporate cards, expense tracking, bill payments and receipt management together in one platform. It also syncs with Xero and QuickBooks, helping keep your spending and bookkeeping organized.
