When you are starting a business, bookkeeping is rarely the exciting part. You are focused on customers, products and getting the word out. But the way you set up your books in the first few months will make a big difference later, especially when tax time comes or you apply for funding.
The good news is that getting organized early is not complicated. Here are the bookkeeping basics every new entrepreneur in Greater Moncton should have in place from day one.
1. Open a Separate Business Bank Account
This is the most important step. Even if you are a sole proprietor, keep your business money and your personal money apart. Use one bank account and one credit card for business only.
When everything runs through one account, it becomes very hard to see what your business actually earned and spent. It also takes much longer (and costs more) to sort out at tax time.
2. Choose Simple Accounting Software
A spreadsheet can work for your first few sales, but it does not take long to outgrow one. Cloud accounting software such as QuickBooks Online connects to your bank, lets you send invoices, tracks expenses and keeps everything in one place you can reach from your phone.
Setting it up correctly at the start matters. A clean chart of accounts and the right sales tax settings will save you hours of corrections later.
3. Keep Every Receipt
Every business expense you can prove is an expense that can reduce your taxes. Get in the habit of keeping receipts for everything: supplies, mileage, phone, software, advertising and equipment.
The easiest way is to snap a photo as soon as you get a receipt. Most accounting apps let you upload it and attach it to the transaction right away, so nothing gets lost in a glovebox or a shoebox.
4. Know When to Register for HST
New businesses do not have to register for HST right away. Once your taxable sales go over $30,000 over four consecutive calendar quarters, registration becomes mandatory. Many startups choose to register voluntarily before then so they can claim back the HST they pay on business purchases.
Whichever you choose, keep an eye on your sales so you know when you are getting close to the threshold.
5. Send Invoices Promptly and Follow Up
Cash flow is one of the biggest challenges for new businesses. Send invoices as soon as the work is done, make your payment terms clear, and follow up on anything overdue. Accounting software can send automatic reminders so you do not have to chase every payment yourself.
6. Reconcile Your Accounts Every Month
Once a month, compare your books to your bank and credit card statements to make sure they match. This catches missing transactions, duplicates and errors while they are still easy to fix. It also means your numbers are ready whenever you need them, whether that is for a loan application, a grant, or just checking how the month went.
7. Plan Ahead for Taxes
As a new business owner, no one is taking tax off your income for you. Set aside a portion of what you earn in a separate savings account so the bill does not come as a surprise. Mark key dates on your calendar too. Self-employed individuals have until June 15 to file their personal return, but any balance owing is still due by April 30.
8. Ask for Help Early
Many entrepreneurs wait until their books are a mess before asking for help. Getting advice at the start is faster and much less expensive than cleaning things up after a year. Even a single training session can give you the confidence to manage your own books.
Need a Hand Getting Started?
Startup Greater Moncton founder Debbie Hawkes is a QuickBooks Elite ProAdvisor, and her team at Accounting Moncton helps new and growing businesses with QuickBooks setup, one-on-one training, monthly bookkeeping, payroll and HST filing.
Call (506) 854-6490 or contact us and we will point you in the right direction.