10 Steps To Start Your Small Business Bookkeeping Off Right

Starting a small business is an exciting endeavor! You’ve come up with a great idea and now you’re ready to get organized. Follow these 10 steps to success to get your small business bookkeeping started on the right track:

small business bookkeeping

  1. Register for a business name and numberOne Stop Business Registry

    • You will want to make sure that your business name is not already in use so that yours will be unique in the market.
    • You don’t need to see a lawyer to start a sole proprietorship business but you should if you plan to start an incorporated business. When you register your name online for a business account number, you can also register a GST or Payroll account at the same time, if necessary. (See Steps 4 & 10)
  2. Get a business bank account

    • Separate all your business banking from your personal banking. Do not use the business account to pay for your personal expenses and vice versa.
    • Try to avoid withdrawing cash from this account – if you need some money for personal use, write yourself a cheque from the business and call it a “shareholder draw” in the memo. If you need to add more funds to the business account, do an online transfer or write a cheque from your personal account and write “shareholder loan” in the memo.
    • Try to avoid using cash to pay for business expenses as this is harder to track.
  3. Determine if you need a business credit card or business loan

    • Speak with your banker about financing options with a low interest rate.
    • As above, only use your business credit card for business expenses.
  4. Find out if you should be charging GST

  5. Find out if you should be charging PST

  6. Create sales invoices

    • A sales invoice just needs to have the following info (as a minimum): Your business name, the customer’s name, date, invoice number (must be unique and should be sequential, ie. Inv#1001, Inv#1002), a short description of the product or service with pricing, and total.
    • If you are charging GST or PST on your invoice be sure to separate out these charges on the bottom before the final total.
    • A simple carbon copy invoice book from any office supply store will do fine in a pinch. For a more professional look, use computerized versions with your logo and invoices prepared from software and emailed directly to your clients.
  7. Use a bank deposit book

    • Resist the urge to make ATM deposits as this makes it difficult for you or your bookkeeper to match up deposits to sales invoices.
    • In your business deposit book, write the last name of the customer and cheque number beside the cheque amount.
    • An electronic option for this is to use a banking app to deposit individual cheques. Since there is only one cheque in the deposit total, it will be easier to match up to the correct customer invoice.
  8. Keep all business receipts

    • Keep all your business receipts in the same spot! A folder or a box would do fine. If you are doing your own bookkeeping, you may want to separate them into envelopes by expense category (e.g. gas, supplies, meals).
    • Yes, all of your expenses should be displayed on your bank or credit card statement, but this is not enough backup should your business face a CRA audit. Also, technically, you are not allowed to claim back the GST on expenses if you don’t have the physical receipts.
    • Alternatively, there are softwares that will replace the need to keep paper copies of receipts! Contact Coastal Tax for more info about electronic document storage as part of your bookkeeping.
  9. Track expenses

    • Hire a bookkeeper or learn to do it yourself. I recommend cloud-based accounting software such as QuickBooks Online. Contact Alicia for a quote on a monthly bookkeeping service package.
    • Another option is to track the expenses in an excel spreadsheet. You will need to include the date of purchase, vendor name, description of the item, and the amount.
    • If you are registered for GST, you will need to separate the GST amount from the expense total (i.e. your final total for “Supplies” should be the cost of supplies before GST). However, you do include any PST paid in the expense total. This is easier to do using bookkeeping software.
  10. Determine if you will be hiring employees

    • Understand that you are legally required to follow Employment Standards rules for payroll. You can learn to do the payroll yourself, but with complicated rules, it is much easier to have an experienced Payroll Administrator do this for you.
    • Learn about your responsibility for payroll source deductions. See my related post The Basics of Source Deductions.
    • You are also required to register for and pay WCB premiums.

Here is another great resource – a checklist to follow from Small Business BC which covers some non-financial steps as well! Small Business BC Starting Your Business Checklist

Until next time!

 

About the Author:

alicia1

Alicia Loewen is a certified Platinum QuickBooks Online ProAdvisor and the owner of Coastal Tax and Accounting Services on Vancouver Island, BC. Coastal Tax is a modern accounting firm and offers all services remotely using online and paperless software to make bookkeeping and tax preparation as painless as possible. Contact Alicia to set up a free consultation.

 

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