Everyone loves being self-employed, nobody loves the bookkeeping and paperwork that goes along with it. Everyone procrastinates and ends up scrambling to get all their documents together come tax time and that makes them hate it even more. But if you’re a small to moderate, unincorporated, sole proprietor business; it doesn’t need to be that hard.
Here is an accountant’s easy guide to bookkeeping:
1) Keep track of your income, either by your invoices or your deposits into your bank account
2) At the start of the year buy an accordion file and label each tab with your typical business expenses; advertising, meals & entertainment, office expenses, supplies, equipment, gas, repairs & maintenance, etc. Every week (or month) move all your business receipts out of your wallet and into the appropriate slot. Some people waste time breaking everything down by month but for filing a self-employed personal tax return, it really doesn’t matter. Just keep the whole years worth of receipts in the one file and your accountant can quickly add them up with their handy dandy adding machine at the end of the year.
3) If you have a home office, each month as your utility bills come in (gas, electricity, cell phone, internet), toss them in a file folder. If you receive them as e-bills save the PDF file in a folder. Then at the end of the year it only takes a minute to add up the twelve months.
4) When you receive your annual property tax assessment, mortgage statement and house insurance policy, toss these in the home office folder. These are huge deductible expenses when it comes to your home office deductions.
5) Keep track of your business kilometres! Either keep a little notebook in your car to jot down your trips, or use a GPS driven app such as www.mileagetrackapp.com. Or at the very least, mark down your business related trips on your calendar and once a month, go back and calculate the kilometres on Google maps. (That’s usually what ends up happening for me.)
6) At the start of the year and at the end of the year, make a note of two things: your odometer reading on your car (as you need to know your total kilometres driven in the year), and the amount of inventory you have on hand, if applicable.
These things don’t take a ton of time, and I guarantee that if you hand all this information over to your accountant come next April, they will be very happy. At least, I would be!
Happy bookkeeping everyone!
Raymie, owner of RLPC Professional Services is a Chartered Accountant with 9 years’ experience at a large local accounting firm, now working from home providing bookkeeping, accounting and taxation services to individuals, small businesses and self-employed clients.
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