As a small business owner, you may decide to conduct your own business accounting. But, there are certain things you must know about accounting to minimize potential risks. Some important small business accounting tips offered by a professional chartered accountant in Edmonton are listed below:
Record Every Transaction
Recording every business transaction is crucial. All business transactions, whether a small payment made using petty cash, salaries paid to your employees, or a lump sum payment received, must be recorded. Without an accurate record, you cannot evaluate your profitability and cash flow needs.
Preserve Every Receipt and Invoice
This may seem like a big task to perform on a regular basis, but it will save time and prevent accounting confusions in the future. Preserving every receipt and invoice will give proof of every business transaction. You can take a look at the receipts in the future and get information about the transactions. If you should be audited by CRA, they will require your receipts and invoices. An auditor will request complete information about your business expenses as they relate to the period under audit. Therefore, maintaining receipts and invoices in a file that you can refer to is crucial as any unsubstantiated expenses will be denied by the auditor.
Develop a System
To keep track of all the revenues and related expenses, you must select the best-suited system of accounting for your business. A manual record keeping system is outdated and time-consuming. You can either digitize the process with the help of Excel spreadsheets or use DIY accounting software such as Quickbooks. Or, you can hire an accountant in Edmonton who will help create a customized accounting system.
Keep your Finances Separate
If you mix up business and personal finances, things can get complicated. Accounting and maintaining records of mixed transactions can be very confusing. Hence, it is best to keep personal and business finances separate and use them for their respective purposes only. Set-up a separate bank account for your business transactions so that they can reflect in one place. Although, it isn’t legally necessary for a sole proprietor or a small business to have a business bank account, having a separate bank account keeps records distinct and will make life easier during the tax season.
Another helpful small business accounting tip is to hire an accountant in Edmonton so that you can concentrate on your business and leave the stress of accounting to a professional. Hiring an accountant in Edmonton helps you save time that you can invest in your business operations, expanding your business, and earning bigger profits.