Business records come in all shapes and sizes. As an accountant I have seen it all, from clients who bring their receipts crumpled into balls in grocery bags to nice, neat accounting files with images of the receipts saved to each transaction. Some may say organization isn't for everyone and it doesn't matter what the records look like, but I am here to tell you it does matter as it can save time, money and stress.
Why do you think organization of your business finances is important? It isn't just to have a clean office. It can lead to something even better. Picture an office that has receipts and invoices in a big messy stack that grows and grows each month. Is it inviting or intimidating? Do you want to jump at them and do your bookkeeping whenever you see it? Or do you leave it and let the pile grow, ignoring the importance of the knowledge those little pieces of paper hold. Now imagine an office that has receipts filed away nicely. I imagine it feels peaceful and makes entering your accounting records less stressful, take less time, and therefore do it more regularly as it is not a chore. Having organized business finances equals less stress and helps ease the process of doing your bookkeeping.
Now let’s consider the money savings you can get from having organized accounting. The client I mentioned above who brings in their receipts in grocery bags, I spend a couple hours just sorting them to get ready to enter. My hourly rate isn't cheap and maybe it's the accountant in me, but I wouldn't pay someone to sort my receipts. It is true, maybe this client doesn't have time to sort his receipts but why not put a simple system in place to keep them. Maybe something as basic as keeping a folder in your vehicle to put them in as you get them. You could even be like my other client I mentioned who takes a picture of each receipt as he gets them with his phone and uploads it to his accounting file. Pretty slick and now as his accountant I simple log into his accounting file and have access to all the records - no paper necessary. Not only can it save on your accounting bill but being organized helps to ensure you are keeping all your deductions and nothing gets missed.
Everyone is different which is why the important thing is finding a way to organize your receipts which is easy and convenient for you. If you choose a system based on what someone told you and it doesn't make sense to you then you are never going to do it and when you do it will take you twice as long to do it. Here are 4 different methods that work for people.
I am not just talking about your invoices and expense receipts, there are a number of other business records you need to keep. Any contracts or major purchases are important and need to be kept on file. As well as any correspondence with Canada Revenue Agency and your provincial tax center.
As a business owner you are required to keep all the records of your business. Not only does Canada Revenue Agency require you to keep them, but it is very important to have back up and proof of all income earned and expenses paid in your company. Things happen, what if you have a dispute with a vendor or customer and you need proof to support your side? Having a paper trail can save your tail. Also, if CRA wants to come in and review your books you don't want to be reassessed or denied an expense because you threw away your records. The time frame you must keep your records according to CRA is six years from your year end. Your records can be either the original paper documents or an electronic version. As long as they are accessible and readable then it is does not matter which form your records are in.
With tax time right around the corner now is the time to get your 2015 finances all sorted and put a system in place to make sure 2016 is smooth sailing.