The 10 Commandments of Good Bookkeeping

Doing your own bookkeeping can be a drag. We don’t know how to make bookkeeping fun, but we can simplify it. We do think that hiring an accounting pro is a good idea (shameless plug, we know), but we don’t think every business owner must go that far, especially early on.

 

Follow these 10 bookkeeping commandments to ensure your business financials are in order. These rules are not mandatory, except for the first three!

 

01.Record everything you receive and spend.

 

This rule is the most commonly neglected in the early business days. Knowing exactly what you earned and exactly what you have spent can save you hundreds if not thousands of dollars in taxes. Don’t estimate – record everything!

 

02.Record regularly.

 

If you can remember everything you did or spent a month ago then you can probably afford to do your bookkeeping once a month. But if you’re like 99% of other business owners, you probably struggle to remember yesterday. Bookkeeping should be a daily routine.

 

03.Keep your records organized and in one place.

 

We know you keep all your papers organized, except those destroyed by your dog, the washing machine or lost in your work truck. But we still need to see them, and so your accountant and the CRA. Where you keep them doesn’t matter, just make sure they are all together. Organized bookkeeping is best, but a shoe box is still okay. You can always upgrade later. 

 

04.Break down expenses by category.

 

By category, we mean “job materials”, “vehicle repairs”, “insurance” and so on. Do not invent your own categories. This can really mess things up come tax time. Homemade cookies are good, homemade accounting is far less digestible. Ask someone if you are not sure.

 

05.Avoid paying cash.

 

Cash is easy to use, when you have it. But it is very difficult to keep track of. Forgetting about cash expenses can cost you in unnecessary taxes. 

 

06.Keep a receipt organizer in your vehicle.

 

By “organizer” I mean whatever tool you use for recordkeeping. Your laptop, notepad or ziplock bag of receipts – as long as it is handy throughout the day.

 

07.Keep your personal and business expenses separate.

 

Open a separate bank account for your business transactions. This will help you keep track of your actual business revenues and expenses without mixing your personal expenses. Your accountant will thank you later. 

 

08.Hold onto your records.

 

The CRA requires you to keep all records and supporting documents for a period of six years from the end of the last tax year they relate to. 

 

09.Use accounting software.

 

Using accounting software, such as Quickbooks, will allow you to better organize your bookkeeping. But only if you use it. Without understanding such things as debits and credits, it might not be a good idea to use professional accounting software. However, if income statements don’t scare you, Quickbooks Online is very user friendly.

 

10.Hire a professional

 

At the end of the day, is doing it yourself worth the trouble and headache? It might be in the beginning, but if the situation gets out of control, remember: ServicePros Business Solutions can help you organize your business finances. Book a free consultation now.

 

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