(1) Types of Business Organizations
(2) Business Product to sell and manufacture and service to perform
(3) How to keep business records
(4) Planning to have employees or sub-contracting
(5) Year-end Requirements
(6) Dealing with the taxman (Canada Revenue Agency)
(7) Preparing for the next fiscal period
|University of British Columbia (UBC) entrance|
This time I will be writing about the third item, “How to Keep Business Records”. This area of business can be time-consuming and costly, if you don’t have a proper planned and implemented system right from the start of your business. Good business records keeping will definitely help your company financially, save valuable time. and extra work that you shouldn’t have in the first place. The following are recommendations for Good Business Records Keeping.
5 Recommendations for Good Business Records Keeping:
a) Make a good list of your accounts.
b) Implement a good accounting system fit for your business
c) Aim for accurate recordkeeping and keep records in order
d) Hire a good accountant if you need one
e) Regular financial statement review or audit if it benefits your business
|Part of UBC Campus, one of the buildings on your right is the new Irving K. Barber Learning Centre. It's a state of an art building, with luxurious Library and even a cafeteria in it.|
Making a Good List of Your Accounts
Before or right from the start of your business, you have to make a list of accounts that likely your business will have. These items may include accounts that will show up on your Income Statement, Retained Earnings, Statement of Cash Flow and Balance Sheet statement. These accounts will be used for your books and for your tax purposes as well (I will write more about taxes in a later time).
|UBC is a huge campus. You definitely need a map to find your way around.|
Implement a Good Accounting System Fit for Your Business
Depending on your business complexity, size, type, and reporting requirements are, your accounting system should be designed according to these important factors. For a small or mid-size companies, you can get away of using an off-the-shelf accounting software or even a spreadsheet will do the job for smaller numbers of transactions. The following software are mostly used by bookkeeping people.
|Dedicated to all UBC 2002 Graduates, I am one of them.|
A spreadsheet, like Excel is an easy and inexpensive to use, and recommended for a company that only have at least a maximum of a thousand or less transactions in a fiscal period. Why is that? With a spreadsheet you actually have to design an accounting system from scratch with the help of your spreadsheet program. You can start with the list of Chart of Accounts, and once you sorted your Source Documents, then you do Journal Entries. You can continue it with the General Ledger, Trial Balance, Adjustment Entries, Income Statement, Retained Earnings, Balance Sheet, and Statement of Cash Flow (if needed).
It’s not recommended, but depending on your time and available resources, fewer transactions like a hundred or less, can wait until the end of the fiscal period to do your books. You can keep your business records with this method as long as all source documents like receipts, cheque stubs, invoices, and other related business transaction information are accounted and properly filed. Why is that? This is to save you time, instead of spending your time on doing bookkeeping, you can concentrate on your business, and bringing in more income to your company.
|Just some of Accounting and Spreadsheet software I collected.|
For over a thousand transactions, I would recommend using an accounting software like Simply Accounting, QuickBooks, or other accounting software. These software are easy to use, just pick a template of Chart of Accounts that fit for the type of business you have. As an end-user, all it requires are a good knowledge of sorting of documents and appropriate account to use as per transaction happened. With these types of accounting software, they do the categorizing, grouping of accounts, calculation, and even providing an up to date financial statements’ reports whenever you need it.
For a more complex accounting system, due to the huge size, type and volume of transactions, and reporting requirement, most businesses will spend a little more. Bigger businesses will likely purchase accounting software like Accpac Plus Modules, or other similar products, or even hire a computer professional to design a special accounting system that is suited for the complexity of the business.
Aim for Accurate Recordkeeping and Keep Records in Order
Believe me, an accurate recordkeeping will not only save you time, but save you money. Adjustments of miscategorised transaction is not as much as a concern to all parties involved, but missing source documents and transaction can be a problem and might cost the business money or benefits. Thus, it is so important to appoint a knowledgeable personnel right from the start, from data-entry to presentation of financial statement reports duties.
|Just some of the Tax, Accounting and Spreadsheet information I collected .|
Hire a Good Accountant if You Need One
Depending on the size of your business and income that your company generates, not all businesses can afford a full-time accountant, who can give you more assurance with your business bookkeeping and better manager of your records. If you already have a good bookkeeper, a one-time annual visit or use of an accountant service won’t be too much for the business to spend. Accountants are “business accounting professionals” who are trained specially in the financial area of business.
To become a professional accountant, either in Canada, US or other part of the world, the profession requires at least 4 years of university courses, and in addition, a 1 to 2.5 years of work experience for US Certified Public Accountants (CPA)and Canadian Chartered Accountants (CA). In addition, 3 years or more work experience for Canadian Certified General Accountants (CGA) and Certified Management Accountants (CMA), especially if the candidate is working full-time and while working on their undergraduate degree and CGA or CMA level courses at the same time. Accountants are trained in the area of accounting, auditing, taxation, business law, finance and other related aspects of the business. A CPA, CA, CGA, or CGA member license is only granted to a candidate after passing a rigorous Uniform Final examination, meeting the educational, work experience, and ethics examination requirements.
Hiring a good accountant, even once a year to go over your books, not only it will give you peace of mind, but probably even save you money for business tax payments that you shouldn’t be paying in the first place. A good accountant is trained to advise, and recommend especially on year-end adjusting entries. An accountant can give you advices on proper accounting of income which are taxable, or deduction which are deductible. In addition, an accountant can help you with other business transactions like preparing your income tax returns, either in individual or/and corporate level. An accountant is trained to spot a non-taxable or deferrable income, or non-inclusion of allowable expense deduction or deferral for lower tax payments during taxation year being reported, thus it just benefits your business. Also, an accountant can help you with your auditing requirement as well.
|Just some of the Accounting, Tax, Business and Auditing textbooks I used, and collected during my time at UBC, and my CPA reviews.|
Regular Financial Statement Review or Audit if it Benefits your Business
Most big companies are required an annual financial statements review or audit depending on related parties’ requirement, especially companies that are on stock exchange, shares for public offerings. Regular reviews and audits are recommended and actually required by shareholders, investors, and members. In addition, at most of times, it is required by creditors in case of seeking loans or funding. A review, especially an audit can give your company’s financial statements extra credibility, on top of having a good accounting system internal control.
Note: The continuation of this topic, “So You Want To Start Your Own Business?” will be continued on next post, “Part 4 of 7: (4) Planning to Have Employees or Sub-contracting”
Any Comments/Inquiries please contact me at:
Earla Riopel, BSCom(USA), DipAcc(UBC)