6 Bookkeeping Tips to Save Small Businesses Money
Trying to save time and money for your small business? Take advantage of these 6 bookkeeping tips and start saving today.
You didn’t start a business thinking about bookkeeping. Yet, many businesses spend a lot of their time balancing the books and trying to prepare for Tax Day. While balanced books are an important piece of ensuring you are on track with your annual budget and ready to pay taxes when needed, there are other bookkeeping tips that can help your business make well-informed financial decisions.
In this blog post, we explore 6 bookkeeping tips you should implement in your business. Follow these tips to save time, money and stress.
6 Bookkeeping Tips to Save your small business money:
1. Keep your business & personal expenses completely separate
When you are running a small business, mixing up business and personal expenses seems like an easy item to remedy. However, keeping those expenses completely separate makes it much easier to manage your business’s finances. It also helps to get a better and more accurate picture of how your business is doing financially. A clear separation of personal and business gives tax auditors fewer reasons to audit your business and personal income. Pay yourself a reasonable salary, then keep the rest of the money separate and in the business.
2. Pay all expenses on time
Paying your business’s expenses on time, especially your credit cards can help keep your business’s credit score healthy! This practice also avoids falling behind on payments and paying late fees on your bills.
3. File tax compliance forms on time
Businesses are required to file taxes and maintain compliance. Filling on time reduces the chances of a CRA audit. In addition, turning in your tax forms on time helps you with tax planning. You should plan on setting aside 15% of your business’s income to cover taxes at the end of the year. The best advice is to transfer those funds into a separate account on a weekly or monthly basis. Make sure to leave those funds untouched until tax time each year.
4. Keep your papers organized
Keeping your paperwork organized is essential. We recommend developing a standard process for filing so that information is readily accessible. You should pay extra attention to monthly financial statements and financial reports. These reports are required during tax season and when preparing your tax report.
5. Go through & audit-proof your records
Keeping receipts and backups for your files should not be taken lightly. Track and save your receipts and ensure that all business-related expenses are accounted for. Especially the ones you deducted from your taxes. In case of an audit, the CRA requires proof that the money was spent, and proof of where it was spent on. Being able to back up your claims with proper documentation ensures you will be able to deduct your business expenses from your business’s taxable income.
6. Don’t go into debt to run your business
If at all possible, avoid going into debt to run or expand your business. If cash flow is short, look for opportunities to cut down on expenses to make the budget balance. A balanced budget is a goal for both personal and business life!
Moving forward with these bookkeeping tips
Following these 6 bookkeeping tips will keep your books balanced throughout the year. It will also save you hours of headaches before taxes while reducing the chances of an audit. Whether you file your taxes yourself or work with an accounting firm, following these tips will make the tax filing process go smoothly.
For more bookkeeping tips and ongoing support
If you are looking for more accounting support for your business, or for more information on why you should be on top of your bookkeeping all throughout the year, please feel free to contact us for further assistance.
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