Ok…let’s get this out of the way first. If the title of this blog post seems vaguely familiar you could win yourself a coffee and a treat on Pathway. Just follow us on Twitter and retweet this post with the hashtag #PathwayMovieRef and guess the correct movie and we will pick one of you at random for a cool $10 gift card of your choice to either Starbucks or Tim Hortons. The winner will be picked the first week of December and will be contacted through Twitter. Oh…our Twitter account can be found here.
So, on to the topic at hand.
It is no secret to many of us running a small business that one of the easiest things to overlook is your books. Oh sure…you pay your bills on time and you invoice your clients and customers in a timely fashion but for many of you, that’s as far as it goes…until the dreaded season of Taxes arrives. You then either scramble for copies of your receipts or you lug out the box that you have been throwing receipts into all year. Some of you will attempt to sort this Gordian knot of finance yourself and some of you will lug your box to your bookkeeper. (As a side note, my friend’s sister’s uncle’s bookkeeper was crushed under the weight of 238 such boxes in what is being called the Taxulanche of ’94. It took his fellow bookkeepers 3 days to dig him free.)
I am going to propose something different for you. I propose that instead of yearly, you do your books monthly. Ok…for some of you even quarterly would be an improvement but I believe every business could benefit from doing the books every month. Without further ado, here are my reasons why.
- CRA deadlines and interactions aren’t as scary or confusing. This obviously includes things like taxes, HST/GST and payroll remittances but one of the lesser considered items here is a good set of books makes any call from the CRA much easier. I once had a conversation with a long time CRA auditor, who now trains the new auditors and he told me the single best way to prevent trouble with the CRA is to provide an answer to the auditor’s questions on the first phone call or at the very least as quickly as possible. The average CRA auditor’s caseload is large and by ignoring their requests, or not providing them with a timely answer is the surest way to get your account escalated up the chain until it reaches the auditors you simply do not want to hear from.
- Preparing your taxes is much simpler. This piggybacks onto the above point but it is worth mentioning on its own. Small business taxes can get really complicated really easy. By breaking down the year into months it makes it easier to catch potential mistakes. It’s much easier to catch a January mistake when you are doing your books in February than it is to try and remember everything while doing your taxes a year later. This applies whether you do your taxes yourself or you have your tax professional prepare them. It goes without saying as well that the better prepared you are, the less work your tax professional has…and that means it could save you money.
- Doing your books monthly is the first step in understanding all the things your business is dying to tell you. Every business has a story to tell but few business owners know how to listen to what their business is saying. It shouldn’t take much to surmise that the language your business communicates with is numbers. Most business owners can tell you some rudimentary things their business is saying but few can really hear many of the most important things their business has to say. This section is far too important to reduce it to a simple paragraph and we will be devoting a whole series of articles about this crucial point.
I hope I gave you some food for thought. If you have questions feel free to book a 15-minute no-obligation conversation, visit this link and book a meeting!