Bookkeeping 101: Bookkeeping Basics for Small Businesses

There’s more to becoming a new entrepreneur than getting your business cards printed. As a budding business owner in Canada, you’ll need to accomplish a number of accounting-related tasks. Before you start ticking off boxes in the start-up accounting checklist below, however, you should consult with a legal advisor to ensure your business is properly set up and registered. The easiest solution to learn about your options for accounting is to talk to an accounting service for information. But it can be overwhelming to identify the right accounting checklist for your new company. Instead, you need to lean on the services and expertise of someone who understands the best processes for small businesses.

Tax compliance is critical and can be complicated depending on your industry and location. This framework should help you identity the key processes to get your business running and avoid some of the most common mistakes. If you follow these steps and rigorously analyze your financial statements, your small business will be ready to carve out its piece of the market. If the IRS audits your company and finds any underpayment of taxes, it will come to you, not your accountant, for any additional taxes, penalty, and interest. The following accounting checklist lays out a recommended timeline for the accounting functions that will show the state of your business and allow you to streamline your tax preparation. For a thorough understanding of business accounting, continue reading.

  1. Also, check out our ebook, The Ultimate Guide to Business Process Automation, to learn more about how you can boost the efficiency of your business.
  2. Preparing financial statements and reports is tricky, and making mistakes can cause problems down the line.
  3. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice.
  4. We’ve put together this small business accounting checklist of things you must do to keep accurate books and ensure your company’s financial stability.
  5. The easiest solution to learn about your options for accounting is to talk to an accounting service for information.

This requires investigating the cash payments, cash receipts, and cash net change across the operating, financing, and investing activities of a business over a particular timeframe. The cash flow report, or cash flow statement, is focused on looking less at broad overviews of the business and trends, and more on activity within business operations. Missing payments could incur charges or interest, or the damaging of valuable business relationships.

When I have a new situation, I look over the listing to see if there is a checklist that could help me and then I go to the Word file.The file is free and you can easily download it from this link. Last year I had over 6,000 requests and it took me way too long to respond so I made it easier for me, and quicker for you, with this link courtesy of Withum. Worth Reading Article, it is very to have a checklist and work accordingly, This article will help a lot of people to understand what process is involved in accounting. All checklists are really helpful to optimize accounting process. Above listed points tell us about the factors we should take into consideration.

You can also hire a bookkeeper to work directly for your business. If you go this route, make sure to brush up on interview questions that’ll help you determine who’s the best fit. Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the new business accounting checklist product appears on a page. Your location, industry, and business type will ultimately determine which governmental license and permits you need. Your tax advisor may, for example, recommend incorporating so you can take advantage of the small business deduction (a reduced tax rate for Canadian controlled private corporations).

Name your business and request for legal approval of the business name

You have plenty of financial statements to review every week, month, quarter, and so on, but your daily business accounting responsibilities consist of one main task. Accruals are accounting entries that record revenue or expenses before the cash is received or paid. At year-end, you need to adjust these accruals to ensure your financial statements accurately reflect your company’s financial position.

Process or review payroll and approve tax payments

Managing your cash flow is critical, especially the first year of your business. Forecasting how much cash you will need in the coming weeks and months will help you reserve enough money to pay bills, including your employees and suppliers. Plus, you can make more informed business decisions about how to spend it. Review the payroll summary before payments are disbursed to avoid making corrections during the next payroll period. A payroll service provider can do all this to save you time and ensure accuracy at a reasonable cost. You can also use our free paycheck calculator to figure out what you need to withhold from each paycheck.

Invoicing your customers

From tax preparation to budgeting and planning for the next year to ensuring you’re on top of technology and software updates, it can feel like there’s a lot to do within a short time. At the same time, businesses need to make sure they pay their own bills on time to avoid late fees and maintain a solid reputation. These expenses that haven’t been paid yet are categorized as accounts payable. Some accounting software products automate bookkeeping tasks, like transaction categorization, but it’s still important to understand what’s happening behind the scenes. It all begins with getting your accounting software set up correctly.

Cash Flow Report

The first thing your lawyer will do is submit a name reservation request on behalf of your company, and a request for legal approval of the name that you’ve chosen. Follow us online and stay up to date with new feature releases, company updates, and more. By clicking https://adprun.net/ CONTINUE below, you will be leaving AdditionFi.com to visit an external website that is not owned or operated by Addition Financial Credit Union. Further, the external website’s privacy and security policies may differ from those practiced by Addition Financial.

How to do bookkeeping for a small business

Managing your cash flow is critical, especially in the first year of your business. Forecasting how much cash you will need in the coming weeks and months will help you reserve enough money to pay bills and your employees and suppliers. Plus, you can make more informed business decisions about how to spend your cash.

This will give you a headstart to make your year-end a successful one. If your heart’s not in it, you’d be better off leaving it to a licensed Certified Public Accountant (CPA) or a professional virtual accounting team like Xendoo. We not only have the knowledge and accounting tools, but also the experience of navigating all the balance sheets, chart of accounts, complex sales tax regulations, and rules.

If you receive paper checks and cash payments, deposit them weekly to keep your cash flow healthy and your records up to date. The following accounting checklist lays out a recommended timeline for the accounting functions that will show the state of your business and streamline your tax preparation. The next step is to understand the benefits and drawbacks of different legal structures. You’ll need both an attorney and a certified public accountant (CPA) well versed in the intricacies of the corporate tax code.

The U.S. Small Business Administration (SBA) can help you determine your state tax obligations. You can also use our free sales tax calculator to help calculate sales tax. Tax planning is the process of analyzing and planning the financial position of your business that will allow you to pay the lowest amount of tax possible while abiding by the laws. In simple words, tax planning is the process of minimizing your tax payable amount. Also, once any business reaches the $5 million a year in revenue mark, it is legally required to use accrual accounting anyway. Therefore, if you use accrual accounting from the start, you won’t need to switch methods once your business grows.