Many small businesses do their own bookkeeping. And why not? Initially, when your business is small, the bookkeeping is quite simple.
But what are the things you should look out for when you’re managing your own books?
Ensure Your Bank Accounts and Credit Cards Are Reconciled
This may seem foundational, but in my experience, this critical step is often ignored. It’s one of those important, but not urgent tasks that always seems to fall to the bottom of the to-do list. The purpose of a bank reconciliation is to ensure that all of the transactions on the bank statements are captured. This is a critical step to ensure accuracy of these bank accounts and credit cards.
If you’re feeling extra enthusiastic, try keeping your mortgage, lines of credit, and any business loans reconciled on a monthly basis. The more accounts you reconcile, the more accurate your bookkeeping will be
Ensure Your Accounts Receivable And Accounts Payable Ledgers Are Always Correct And Up to Date
This can get out of hand quite quickly if it’s not managed or reviewed on a monthly basis. The Accounts Receivable (AR) and Accounts Payable (AP) ledgers tell you how much people owe you and how much you owe others. Review your AR Aging Report and see if there’s anything that’s over 90 days old. If so, it should probably be written off. Similarly, anything in the AP Aging Report that’s over 90 days is probably wrong and should be written off.
Ensure your GST, PST and Payroll accounts on your balance sheet agree to the CRA.
Keeping the government paid and up-to-date will give you peace of mind, and keep you out of trouble further down the road.
How Do You Know When Your Bookkeeping is Getting the Best of You?
If your bank accounts and credit cards haven’t been reconciled for more than three months, when your AR and AP balances don’t make sense because there are so many things in there that shouldn’t be in there, or when you are not sure if government remittances are being paid on time or if they are being paid at all…. Never mind if they are even being filed correctly. Then you know you’re falling behind.
So What Do You Do?
At this point, you would reach out for help. You initially start by asking friends or family. Or, you consider hiring an administrative assistant to do some part-time bookkeeping. Another option is to get help from outsourced small business bookkeeping services.
Regardless of which route you go, it’s hard for you know if they are capable.
Here Are Some Practical Questions You Can Ask
- Demonstrate to me how you would perform a bank reconciliation.
Answer: At this stage, they should be asking for a bank or credit card statement. Then they would go into your accounting software and start doing the bank reconciliation. If they look like they are struggling with this, then it’s a sign that you should keep on looking.
- I have 2 invoices that are still sitting in my Accounts Receivables. But, I’ve already received them. In other words, these two invoices should no longer be in Accounts Receivable. What would be journal entry to fix these errors?
Answer:Dr. Revenues Cr. Accounts Receivable
- How are you able to find out if my GST has been filed without picking up the phone and calling the CRA?
Answer: I have to first gain access to your CRA online account. Then I can check whether your GST has been filed.
As your business grows, your bookkeeping will get more complicated and more extensive. So it’s important to get the right help at the right time so you don’t become overwhelmed and fall behind.