Did you jump out of bed this morning, super pumped that you were going to organize your business finances? I’m guessing no. It’s not the kind of thing you go around wanting to shout from the rooftop. But, like many other non-sparkly things that are part and parcel of running a business, it is a necessary evil.
Why is it important to organize your business finances?
First off, your tax return depends on keeping track of those receipts! Without keeping proper records, there is no way of tracking money coming in and money going out. Not only does being organized keep tax time less stressful but lets you monitor your spending!
Also, you will need to produce proper records if you ever get audited. Canada Revenue Agency insists that all of your business expenses need to be backed up with receipts. With no system in place, tracking down your records will be extremely time-consuming, not to mention tear-jerking.
If you outsource your bookkeeping (a good idea if bean counting is not your strong suit and your time is better spent doing what you are good at), being organized will help your bookkeeper be more efficient. This will save you money.
How do you organize your finances?
There are many different systems to choose from. Pick one that makes sense to you and one that you will commit to using. Remember, keep it simple! This is just keeping track of money coming in and money going out.
Assign a folder or envelope for every month where you pop in those receipts for the corresponding month. But be sure to write on your receipt exactly what it was for beforehand. You need a legible vendor’s name and date!
Keep your receipts in one spot so you are not wasting time searching.
Have an extra envelope in your car for receipts when you are out. Many a receipt has fallen victim to the purse, wallet or glove compartment monster, never to be seen again!
You can also use a digital scanner to scan receipts and put them into assigned folders on your computer. There are also lots of mobile apps available to help organize expenses such as Expensify and FreshBooks.
Don’t let them pile up! Establish a system to enter your receipts into an accounting system—weekly or monthly—and always remember the “Golden Rule:” when in doubt of whether or not to keep a receipt, keep it.
Then file, file, file. Keep your records nicely tucked away in a file box or filing cabinet. If your records are digital, make sure there is a back-up of them. According to the Canada Revenue Agency, you must keep tax records for a minimum of 6 years.
Once you have adopted a system and your business finances are wonderfully organized, you may just feel like shouting it from that rooftop!
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