4 easy steps to: Get caught up on your bookkeeping
As easy as it is to keep putting it off, it’s worth catching up on overdue bookkeeping well before tax season rolls around. Having tax-ready books can help you comply with CRA recordkeeping requirements as well as ensure you are able to file your tax return on time.
If you are already past due on your tax return, or multiple years of returns, time is even more of the essence, as you will continue to rack up additional interest each month on any balance owing to the CRA!
This is why we offer a Backdated Bookkeeping Service here at Small-Books; to get your books up-to-date and taxes filed as quickly as possible. But we know that some business owners prefer to tackle overdue bookkeeping on their own. If that is your case - here’s a step-by-step process you can use to plow through your bookkeeping backlog in no time.
Step 1: Gather your receipts
First and foremost, you will need to start by collecting all of the receipts and invoices related to your business operations for the tax period in question.
Here are the two main records you will need to look for:
Customer invoices
Review your customer accounts to ensure that you’ve collected all customer invoices for sales you have made during the tax year. If your business operates using a cash basis accounting method, you only need to include the invoices that were paid in the specific tax period. But, if your business uses an accrual basis accounting method, you must record the amount in your books the moment the sale occurs (even if you haven’t received the cash yet). This means you will need to include the invoices for any sales that occurred in the tax period - whether the cash has hit your bank yet or not.
Business expenses
Collect the receipts from every business purchases you have made during the tax year. You can also use this comprehensive list of small business tax deductions to double check that you’re tracking and claiming every deduction available to your business.
Step 2: Decide how to track your expenses and your income
You’ll need to go through each of your records from above and categorize all of your transactions (What was the source of each income? What was an office expense? Was that an asset purchase? And so on).
If your business is small, working off of a simple Excel spreadsheet may suffice for this process. If your business is a bit more complex, you might want to invest in a software like QuickBooks Online (or hiring a bookkeeper to take care of this part for you).
Step 3: Reconcile your bank accounts
Once your transactions are all recorded, it’s important to reconcile your bank accounts so that you can identify any errors in your books or bank records. Compare each transaction from your bank statement with the same transaction in your business’ records to ensure the balance of each account is the same. If they aren’t, identify and fix any errors to ensure that the balance in your bank statement matches the balance in your company records.
Handing over any accounts to your bookkeeper or accountant that aren’t properly reconciled can be costly. If your accountant has to do extra work to reconcile your accounts and fix your books, you will be charged extra in accounting fees.
For more help on how to complete a bank reconciliation, check out our article Bank Reconciliations: Everything you need to know.
Step 4: Have a tax professional review your expenses
If you’re reading this article, it’s likely that you’re wanting to do everything yourself when it comes to bookkeeping and filing your taxes. And we hear you. It’s often the least expensive way to go about things. But we do strongly advise that you have an experienced small business tax professional review your books, tax deductions, and any other financial information relevant to your tax return, before you file your taxes.
This helps to eliminate errors and ensure that you’re claiming all of the deductions available to your business. This is something Small-Books can help with! Check out our tax filing services.
Why not leave it to the professionals?
Small-Books backdated bookkeeping service will get your books caught-up and taxes filed FAST. If you want to get the CRA off your back and avoid any more interest or penalties:
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Small-Books assumes no liability for actions taken in reliance upon the information contained herein.
