The source of these bad habits; ignorance, disorganization, outdated record keeping methods, and making record keeping of secondary importance to operational matters.
Here is a list of common bad habits and ways that I as a Canadian online accountant can provide solutions for with the use of the latest in online accounting apps.
Bad Habit: Traditionally many small business owners, especially when first starting out, use personal funds and bank accounts to finance their venture.
Problem: it creates a record-keeping nightmare.
Outcome: Missed expenses/deductions useful for valuable write-offs at tax time. Not to mention all the added time necessary to sift through shared accounts and additional professional fees charged for more time spent correcting the mess.
Technological Solution: Apps like Receipt Bank and Xero provide mobile apps that allows one to record a personal expense at the point of purchase, snap a picture of the receipt and record the purchase as a employee/shareholder personal outlay for repayment. By doing this in real-time you avoid the heartache of sorting through hundreds of transactions months after the purchase.
Bad Habit: Traditionally many small business owners neglect record keeping throughout the year by simply throwing all their business receipts into a shoebox during the year, leaving the expenses to be recorded and categorized at year-end.
Problem: Risk of losing expenses useful for valuable write-offs at tax time. Missing valuable ITCs (reclaiming HST spent) when filing the business’ HST return. Furthermore, when the time comes to record the expense one may forget what the expense was for and will spend double or triple the amount of time figuring it out.
Outcome: the possibility of lost time and money.
Technological Solution: Apps like QBO and Xero provide for on-going real-time record keeping with features like live bank feeds. Furthermore, apps like Xero have storage capability to store a record of the purchase receipt with the actual transaction; leaving little concern of losing any purchase support should the business have an audit at some future date.
Bad Habit: Traditionally many people keep paper record or amateur excel sheets of their accounts
Problem: mathematical or human error. Most business owners are not accountants, so just because they can add does not mean that they get the full picture, by being able to accurately prepare the financials with balance sheet accounts, etc.
Outcome: the possibility of wrong tax filings, etc.
Technological Solution: Apps like QBO and Xero provide accountant ready professional reporting once the transactions have been entered into the user-friendly platforms.
Bad Habit: The traditional shoebox method of managing small business accounting records does not provide a meaningful financial picture to the small business owner until the once a year trip to the local accountant
Problem: This traditional method prevents useful and timely decision-making
Outcome: Expenses will not be actively budgeted and may spin out of control in no time, possibly leading to an existential threat to the life of the business
Technological Solution: These apps provide a real time view of your business’ financials.
Future Balance CPAs is a Canadian online accountant firm based out Toronto, Canada and serving all of Canada. Call us today for help with your small business bookkeeping, accounting, tax and advisory needs.