Accounting Tips For Small Business Owners In Canada

admin January 29, 2023 7 min read

For managing operations, planning, and avoiding costly errors that attract the attention of the Canada Revenue Agency (CRA), accounting tips for Canadian small business owners are essential.

Additionally, if you are unprepared, keeping up with accounting-related tasks can quickly become overwhelming.

It is essential for owners of small businesses to comprehend the significance of keeping accurate financial records. One of the most significant financial challenges small business owners face frequently is dealing with unexpected expenses.

Are you interested in finding out how to run a profitable business? Maintaining excellent accounting records is the key. That’s why we’re here today to talk about some accounting hints for Canadian small business owners. Read on to find out more!

10 Accounting Tips for Canadian Small Business Owners
Here are some helpful accounting tips for Canadian small business owners to help them gain a comprehensive understanding of their company’s financial situation.

#1. Separate personal and business expenses

Putting your personal and business finances in the same account can quickly cause a lot of issues for your small business.

For instance, you must examine all of your bank statements during the reporting period to ensure that you have invoices for each customer payment.

If you have a separate account just for business, it’s easy. However, if you combine personal and business transactions in the same bank account, it will be hard to tell which is which.

Registering for a credit card and business bank account is an easy way to accomplish this.

#2. Start keeping track of every transaction that occurs in your company.

This is one of the simplest accounting hints for Canadian small business owners.

As a business owner, it will be simpler to determine the nature of the transaction right away as opposed to at the end of the year.

You can build a solid foundation for your bookkeeping needs by expanding on your record keeping skills.

It is also helpful to organize all of the transactions that you are recording so that you can find any records you need at any time.

#3. Put money aside for taxes.
Paying taxes is important for every business. Therefore, routinely set aside funds for it.

The Canada Revenue Agency (CRA) can levy interest and penalties on unpaid taxes, so make sure you have the money you need when you need it.

#4. Accuracy of records improved

One of the fundamental accounting tips for Canadian small business owners is to organize your account records.

Naturally, this makes a big difference when you do your bookkeeping a year later and forget where your receipts are or which ones are for personal or business expenses.

If you like to keep records on paper, keep them safe in a filing cabinet or filing box.

It is essential to store papers in a hanging file system for optimal efficiency. Put each type of paper in its own folder and keep them upright in a filing box on a shelf or in a filing cabinet.

If, on the other hand, you prefer to keep records electronically, organize all of your accounting data. To prevent data loss, you can save your files on cloud storage services like DropBox or OneDrive.

In this case, you can still access all of your data from another device even if something happens to your computer. As a result, it is preferable to stick with just one method of record keeping, either paper-based or paperless.

The electronic option does not take up any physical space in your office and is simple to store and search for.

#5. Make time each week to do your bookkeeping. Review your financial records every week to stay on top of them. Additionally, it will provide you with up-to-date information regarding your company’s current state.

In addition, you’ll know how to control your cash flow and what expenses you’ll have to pay. You can figure out how much money your business has made each week by going over your financial records every week.

Additionally, it will enable you to conduct an analysis of any potential financial circumstances, allowing you to mitigate their impact or completely avoid them.

#6. Hire an Accountant
Hiring an accountant is one of the simplest ways to avoid the stress of keeping up with your business’s bookkeeping. Any time you want it, an accountant will provide you with information about your financial situation.

A professional accountant can also produce interim reports for you and ensure that all of the data and information you have are accurate.

Indeed, if you don’t know what you’re doing, accounting software can be extremely difficult to use at times. In order to keep up with your company’s bookkeeping requirements, it is essential to hire a qualified accountant.

#7. Maintain a close eye on your invoices
Another common oversight made by small business owners is combining receipts and invoices.

Bills that are late or not paid can hurt your cash flow. The next step is to establish a procedure that can be followed in the event that a bill is not paid, such as sending a second invoice, calling the customer, or even imposing penalties such as additional fees at specific deadlines.

During your monthly and weekly bookkeeping tasks, be sure to keep track of all of your paid and late invoices.

#8. Practice Budgeting
One of the most fundamental accounting advice for Canadian small business owners is to practice budgeting. Setting aside money for the necessities of your business will be easier if you create a budget that breaks down each dollar you intend to spend.

In addition, you will quickly comprehend the amount of taxes you will be required to pay. You will need to practice budgeting for things like supplies, maintenance, repairs, additional inventory, and supplies.

For a new business, practicing budgeting will help you form healthy habits that will help your business grow.

#9. Putting together a retail audit scheme
A retail audit scheme is a detailed, chronological record in which financial data, such as accounting records or project details, are tracked and traced.

You will be able to verify the accuracy of the recorded information with ease thanks to this scheme, which will assist you in locating all of your previous transactions.

Estimates, invoices, and purchase orders are a few of the documents that can be included in an audit scheme.

More so, creating an audit scheme will make it easier to prevent fraud in your business and improve your accuracy when it comes to paying taxes and finding any missing transactions in your list.

#10. Make a new estimate of the profit and loss for the year.

If you own a business, you should look at how much money you are making, whether your net assets are increasing or decreasing, the difference between revenues and expenses, what caused those changes, and how profits are spent. While you’re at it, you’ll find problem areas and make adjustments to boost sales and profits.

Financial Controls – Accounting Tips for Small Businesses in Canada – Oakville Mississauga Accountant Effective financial controls are essential for Canadian small businesses. Fraud, unreliable business intelligence, and inadequate financial information can all result from a lack of financial controls.

Controls over the finances include:

- Keep receipts for expenses; without them, you have no proof of purchases.
- Make sure you maintain a separate credit card for business purchases only. The last thing you want is grocery bills or movie tickets appearing on your credit card. Imagine if a tax auditor sees that.
- Open a separate business account for your business expenses and deposits. Ensure there are no personal expenses in your business account.
- Always keep a daily sales log and a deposit book to track sales deposits. This will not give room for employee theft.

Dual signatures are advisable on company cheques. If only one person is authorized to sign cheques, then that person can commit fraud by writing cheques for invalid expenses.
Review and approval all employee expense reports before they are paid, which will keep spending under control.
Regularly back up your electronic financial data so you don’t permanently lose it.

Discuss ways to enhance or expand the financial controls of your small business with your Mississauga or Oakville accountant. Keep in mind the aforementioned accounting tips for Canadian small business owners when managing your finances.

You can also see how business immigrants can enter Canada.

Most Common Questions Can owners of small businesses handle their own accounting?

Yes, numerous business owners do this. However, as your business expands, you may require the assistance of an accountant.

As a proprietor of a business, how can you pay yourself?

As a business owner, you can pay yourself in two main ways:

Salary: As an employee of the company, you pay yourself a regular salary.
Owner’s prize: Profits from your business can be used to pay you, either in cash or in kind.

What kinds of reports ought a small company to have?

A small business needs three fundamental reports to keep track of its finances: the cash flow statement, income statement, and balance sheet.

Conclusion By implementing the aforementioned accounting tips, your company’s financial record-keeping can dramatically improve.

In particular, it will enable you to devote more time to expanding your business and strengthening your relationships with customers rather than to managing the financial aspects of it.