Last updated: Sep. 28, 2020
As a small business owner, you need accurate and up-to-date financial information so you can make the best decisions for your business.
As your business grows and you hire employees, or take on more customers, keeping track of your business expenses and ensuring your books are accurate becomes more complex and time-consuming.
It’s a lot to keep track of while also running your business – sales, expenses, salary payments, and any other money that goes in and out of your business.
You know how important it is to keep good records, not only for CRA compliance and protecting yourself in case of an audit, but also if you want to sell your business down the line.
And frankly, you’re sick of staring at spreadsheets or teaching yourself how to use accounting software. You find yourself falling behind and losing track of receipts, and you’re afraid of missing out on important deductions or overdue invoices that cost you money. You know it’s time to outsource the work and hire a professional bookkeeper.
What does a bookkeeper do?
A bookkeeper records the financial transactions of your small business. They develop a system that organizes your sales, purchases, payments and receipts. They record the information in accounting software and help you make sense of your numbers.
Processing your receipts, expenses and payments is just one part of the equation. A professional bookkeeper will make sense of the numbers, identify trends and how you can apply them to your business. They will provide you with a complete set of year-to-date accounting records, giving you a picture of the financial health of your business and allowing you to make timely business decisions based on accurate data.
With accurate bookkeeping, you’ll have valuable information like how your business is performing, if you’re making a profit, which marketing campaigns are successful, and more. Armed with this information, you’ll be able to make informed and timely business decisions.
Before you hire anyone, you want to make sure it’s worth the cost. In this article, we outline eight benefits of hiring a professional bookkeeper for your small business.
1. A professional bookkeeper will save you time
You spend hours and hours each month on bookkeeping and other financial tasks. Since it’s so time-consuming and tedious, you always leave it at the bottom of your list. Then when the tax filing deadline creeps up on you, you waste valuable time scrambling to catch up.
And any time spent managing non-core activities – like bookkeeping – is time spent away from growing your business. The time you would spend on bookkeeping can be dedicated to your business – product development, customer experience and ultimately, your bottom line.
2. You won’t miss unpaid invoices
Late and unpaid bills can put a dent in your cash flow and business goals. A bookkeeper can put a process in place that helps keep an eye on your invoices. This can include sending out reminders if a bill is late, making a phone call, or issuing a late fee penalty.
They’ll also keep on top of any late or forgotten payments, so you don’t have to worry about missing financial obligations.
3. They’ll help you identify any cash flow issues
Since your bookkeeper handles the day-to-day recording of your invoices, receipts and other transactions, they have a good handle of your income, expenses and spending habits.
Their attention to your accounts will help you understand your business performance and identify any cash flow issues as they come up.
4. You can focus on growing your business
Understanding your business income and expenses month by month will help you get a handle on your financial situation. You’ll be able to identify spending patterns and sales trends.
A tax professional and bookkeeper can help you make better business decisions about your day-to-day operations, like what time of year it’s best to make major purchases. They can help forecast seasonal ups and downs, ensuring you have access to capital during the slow months and avoid taking out too much money during good months.
A greater awareness of spending will help you control and lower operating expenses where possible, saving you money in the long run.
5. Tax season will be smoother
If you hire the bookkeeper at the same firm that employs your tax specialist, they’ll work together to ensure you have an update of your accounting records and return filings.
From this they’ll provide you with an interim or year-end financial statement, giving you a clearer picture of your business’ financial health and an advance view to what your annual tax obligation may be. You’ll be able to make decisions in advance that could modify or lower your tax bill.
And having your paperwork in order makes it easier to prepare accurate and complete tax returns, such as income tax and GST/HST/PST returns.
6. You’re prepared for an audit
In the unlikely event your small business is audited by the CRA, having accurate and up-to-date records will ensure a smoother audit process. The sooner you can get back to running your business, the better.
If you’re considering applying for financial assistance programs related to COVID-19, having up-to-date records will ensure your applications meet the appropriate government requirements and would pass any review or audit test.
If you’re already enrolled in an existing COVID-19 program, we expect the CRA will increase their audit activity in the coming months due to the demand for financial assistance programs. You should have peace of mind knowing that if the CRA comes calling, you won’t have to worry about getting your books organized and proving your compliance with program guidelines.
If you’re worried about audit activity, good bookkeeping is your best defense. Without proper records to support your income tax return or GST/HST return, non-income items can be taxed as income and legitimate expenses may be disallowed, among other problems.
7. It’s easier to secure loans from banks and other creditors
Creditors need accurate information about the financial position of your business before they give out a loan. Good records show prospective creditors that you know all facets of your company.
You will have an easier time securing capital when you are able to clearly outline past performance. Banks and other lenders need to be assured that you have solid history and a good handle on your business’ finances.
And if you want to sell your business, good financial records demonstrate the value of your business to prospective buyers.
Besides, when it comes time to sell your business or secure capital to grow your business, being able to thoroughly document your past performance will help your company’s valuation.
8. You won’t miss any credits or deductions
Without proper bookkeeping, input tax credits may be overlooked or forgotten when income tax or GST/HST returns are filed.
And you want to make sure you’re taking advantage of every possible tax deduction. The more you can claim, the lower your tax bill.
There’s a lot to know when it comes to expenses and what you can claim. And missing a deduction means paying more in taxes than you need to.
Even though you don’t need to send in original receipts when you file your taxes, if the CRA wants to see proof of a claim and you can’t find it, you can’t claim it. A bookkeeper will keep everything organized for you.
The best bookkeeping solution is a partnership between your bookkeeper and tax specialist to provide you with the best financial strategic planning for your business. FBC offers a customized, on-site bookkeeping solution for small businesses as an added service to tax preparation. This integrated approach saves you the most tax over the long-term.
If you’d like to learn more about how FBC can support your business, call us at 1-800-265-1002 or email firstname.lastname@example.org. You can also book an appointment online.