Find your way with our blog

COMPASS

We want to give you as much value as possible. Our blogs and newsletters cover everything from T slips and tax deadlines, to tips on staying organized, and recommendations on great books for small business owners. 


Subscribe to our upcoming newsletter for small business advice, and financial and tax tips for entrepreneurs.

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

Bookkeeping is the day-to-day task of recording and categorizing your business transactions. When you hire us to do your bookkeeping, we’ll import your bank and credit card transactions right into Xero and categorize each and every one for you. At the end of the year, you’ll be all set to get every write-off available to you. 

Once we get started, there are a few important things you need to keep and store. Here’s what you need to do, and pointers on how to stay organized. 

 

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 pull out when you’re paying for anything. Keep business credit and debit cards for business expenses; personal expenses should come out of your personal account. 

If you always keep your business and personal expenses separate, your bank statements are an exact record of your business.

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

Although we don’t need to see every receipt you keep, you need to keep every business expense receipt for seven years. A physical copy is OK, but we recommend making a digital counterpart (more on digitizing below). 

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 will 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.)
  • 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.

 

HOW TO TRACK NON-BANK EXPENSES
(Home office, vehicle, owner draws, unusual purchases)

New clients will receive our Home Office Expense Worksheet, which 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. 

Make 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 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, how to name and tag 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. Receipt Bank is another useful OCR option. 

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

 

HOW TO PAY YOURSELF

The year-end calculation spreadsheet has a tab to track the owner’s draws and cash contributions. If you’re taking dividends, this is a good place to track the draws of each shareholder during the year, as well as capture any shareholder cash injections during the year.

If you’re unsure whether you want to take dividends or wages, use the spreadsheet to track all your draws, and then we will have that conversation in the weeks leading up to your year-end. 

You can take an annual wage (or a once-a-year bonus), and claim it as a wage — you 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.

 

WHAT NOT TO DO

  • Don’t create a spreadsheet to track all your expenses — you will 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 $.59/km.
  • Try not to withdraw cash from your business account. If you do, enter it into the Unusual Items worksheet.
  • 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 doing your bookkeeping. And read more about Bookkeeping topics that may be helpful to you and your small business. 

Comments (0)