Properly managing your finances is an important part of keeping your business running efficiently and increasing profit. Implementing the right accounting and tax practices can go a long way towards keeping your business focused on its goals and identifying opportunities for growth.
This article will provide tips on how you can implement effective accounting practices for your firm, as well as employing the correct tax preparation strategies in order to benefit your business.
Important Accounting Practices for your Business
It goes without saying that your business should strictly adhere to accounting practices that are transparent, accurate and effective. The following practices can help you achieve these standards.
Prepare Monthly or Quarterly Financial Statements
As you run your business, it is essential to prepare regular financial statements, which will provide insights into how your business is performing. Your financial statements should include balance sheets, statements of cash flow, income statements, and gross/net profit. Accounting software can help you prepare these documents, or you could seek the services of an accountant.
Whichever option you choose, financial statements enable you to assess how profitable your business is, manage your expenses by identifying areas of improvement and being compliant with Canadian laws covering income and taxes.
Keep your records accurate and up-to-date
It is important to maintain accurate record keeping of all your business transactions. Utilize accounting software to record these transactions, or keep all your receipts so you can compile them at the end of the financial period. A small mistake in your records can lead to multiple complications when preparing your financial statements.
In keeping your records accurate, make sure you record all your expenses, income and outstanding debts in dedicated accounts.
Keep Business and Personal Expenses Separate
As a small business owner, it may seem convenient to mix personal and business expenses together. However, this can lead to confusion in how you run your business and it can decrease the visibility of how your company is performing. In addition, mixing the two expenses can lead to tax issues when filing your returns.
Tips for Preparing your Taxes
Closely Monitor your Income
Keep track of all your income throughout the year, and make sure all transactions are well documented. Receipts from sales made, services offered and allowances received should all be accurately recorded.
Keep Track of all your Business Expenses
Same as your income, all your business expenditures should be accurately recorded. Operational expenses, asset expenses, and other business related costs should all be recorded in preparation of filing your return.
Seek Professional Advice
Seeking the services of a professional accountant can go a long way towards helping you operate your business. An accountant can help you develop a process of recording all your transactions accurately, in addition to preparing your financial statements and taxes on your behalf.
Their knowledge of accounting and tax laws for small companies can help you ensure that your business is always compliant with the required regulations.
About the Author: Gerald Hunt
After graduating from the University of Calgary with a Bachelor of Science degree in Computer Science, Gerald joined KPMG (Formerly Thorne Riddell) as a Computer Accounting Customer Service representative. In this position, Gerald installed accounting systems in over 200 different small to medium sized companies over a 6-year span.
In 1989, Gerald left KPMG to continue to work with small business clients in his own corporation installing computer accounting systems. While in this role, he was engaged by the DeVry Institute of Technology in Calgary to teach various courses. In time, Gerald moved up through the ranks of DeVry until he attained the position of Director of Finance for the Calgary Campus.
He also acquired his Masters of Business Administration from City University of Seattle, Washington in 2001. Gerald’s career has always been focused on small business, accounting, and education. Visit Padgett Business Services, and book a free no-obligation one-hour consultation.