My name is Madeline and I am a co-owner of True North Accounting. I am responsible for the day-to-day administrative duties and wanted to write a blog about how True North Accounting handles its own taxes and small business bookkeeping - it’s a great way to show you how we have simplified our own processes behind the scenes. I’m not an accounting professional. I had no experience running a small business before True North. And I am prone to anxiety when it comes to taxes, deadlines and the rules, so I wanted to learn everything about the subject when we first started in January 2015. Today, I’m proud of our simple processes, and want to share them with you.
Matt and Curtis talk about common bookkeeping errors and changes to bookkeeping in our latest podcast.
BOOKKEEPING WITH XERO
A software program called Xero has been a game-changer for us. Used for invoicing and bookkeeping, we import our bank statements and our Mastercard statements into the program, then reconcile the transactions on a regular basis. (Remember, I have no accounting background). The bank and credit card statements show all the expenses for the company and all of the payments received. For the expenses, I can usually tell what account the expense should be coded to based on the vendor name and description from the statement line (e.g. Staples goes to Office Expense). If there’s something I’m unsure about, I ask one of our accountants or bookkeepers later.
For the payments deposited, I match the deposit amounts to the invoices we have in Xero. Sometimes deposits get clumped together so I need to figure out which invoices are included in the deposit; I use the merchant services receipts, online payment printouts, and the cheque deposit book to connect each payment to the corresponding invoice in the system.
WHAT TO DO WITH RECEIPTS
I use two file folders for receipts: one for all the receipts that I used the debit card and one for the expenses paid for by Mastercard. That way when I’m reconciling the chequing account transactions in Xero and I want to review a receipt, I just need to search through the debit card receipts to find it. Same idea with Mastercard transactions. When we’re done reconciling, I put them into large ziplock bags, label them and store them away. We keep these receipts for seven years.
Payroll seemed very intimidating when I first started out. Calculating all the deductions and remittance deadlines for payroll was difficult enough; as owners, we also need to get paid and send in remittances for our tax and deductions, as well as for our employees. I use an online payroll program called Payment Evolution. It was simple and straight forward to set up, and now it takes me about four minutes to complete payroll every two weeks. Plus it’s free for up to five employees!
The CRA payroll remittance deadline is the 15th of the following month and if you’re late there’s a 10% penalty each time. We want to avoid missing deadlines at all costs (read more about payroll remittance in our FAQ). To streamline this process, I estimated our average monthly payroll remittance (based on annual amounts) for the whole company, and then I added a little bit extra (better to overestimate than come up short). Then I set up an automatic CRA payment that comes out of our bank on the 10th of every month, which means I don’t have to think about it! At the end of the year, we calculate the actual amount of remittances that should be in for each of the staff and prepare the T4 slips. As owners, we just take what is left over and use that for our own T4 slips. Sometimes we (personally) have to pay a bit extra in April when we do our personal taxes, and sometimes we get a refund. We revisit the estimates if there are any staff changes.
GST AND CORPORATE TAX
I also use automatic monthly payments for GST and Corporate Income Tax instalments. We try to set it and forget it during the year and then true it up when we do our annual GST Return and Tax Return. We base the amounts on our instalment schedule for Corporate Tax (or prior year amount owing) and the GST on the prior year. We may adjust for significant changes in estimates during the year. Again, we don’t mind over-contributing, so we get a refund after filing the Returns, rather than owing.
As someone who had to learn all of this from scratch, I feel great about how easy it is to stay on top of everything. These tricks save us a ton of time, money and stress! Our process won't translate perfectly to every business, so don't hesitate to contact us if you have questions.
Read more about Bookkeeping topics that may be helpful to you and your small business.
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