The type of record keeping system you need largely depends on the size and complexity of your business. It also depends on how comfortable you are in managing your financial records.
Some options you may consider:
- Hire an external record keeping and accounting service.
- Keep your own records and do your own accounting.
- Assign the task to an employee.
- Do your own daily record keeping but hire an accounting service to manage your year-end return, government reporting and T4 preparation.
No matter what type of business you run you will need a way to track your income and expenses. It's very important to know who owes you money, what money you owe and what you're spending your money on.
If you have a very small business you might record your transactions on a spreadsheet. If you run a larger business or do your own accounting, you may wish to purchase accounting software that allows you to do more, such as record your transactions, manage your inventory and issue invoices.
You're required to store records that support your business tax return for a minimum of six years from the time you file your return. Some records must be kept longer. The Canada Revenue Agency provides a complete guide to record keeping and retention.
Tips for staying organized:
- Schedule time to manage your records. Depending on your business size and type you may need to do this daily, weekly or monthly.
- Mark important dates in your calendar so you don't miss deadlines. This is a particularly good idea for your quarterly or annual payments.
- Set up a filing system with separate files for items that need to be paid, items that have been paid and receipts from other expenditures.
- If you run a home-based business keep your personal and household bills and receipts separate from those for your business.
- Keep separate accounts and credit cards for your business.
- Always ask for a receipt. If your receipt does not have the vendor or item purchased on it, you should write it on.
- If you use your vehicle for both personal and business use, keep a mileage log.
- Store the records for each year in separate files.