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Tip # 1 - Keep accurate books and records

 As a small business owner its very important that you keep accurate books and records in order to:

  Assess the profitability of your business

  Evaluate the financial health of your business

 Cut costs by identifying excess spending

  Have peace of mind when audited by the Canada Revenue Agency

  Apply for a loan by presenting accurate financial statements to your bank

 

Tip # 2 - Review financial Reports Regularly

A proper accounting system should provide you with accurate, monthly financial reports such as:

  Income statements

  Balance sheets

  Goss margins by product

  Inventory listing

  Cash flow statements

  Budgets

  Financial statements by company division / department

With monthly cash flow statements you can identify the sources and uses of cash, which enables you to better manage company resources.

With monthly budgets and budget reviews you can identify when you are not operating as plan and take corrective action in a timely manner

With departmental financial statements you can assess the profitability and financial health of each department.

 

Tip # 3 Purchase the right accounting software

Your small business in Canada requires an effective accounting software package to produce reliable financial reports.

Two popular and powerful small business accounting programs are QuickBooks Pro and Simply Accounting, both are easy to use and produce a number of standard accounting reports and information

In addition to the right accounting program, your small business in Canada requires an excellent bookkeeper.  If you have a good accounting software package, but you lack a capable bookkeeper, then the information produced by the accounting system will not be reliable or useful.

 

Tip # 4 - Implement strong financial controls

Effective financial controls are a must for a small business in Canada.  A lack of financial controls can lead to unreliable business intelligence, poor financial information and fraud.

Examples of financial controls are:

  Keep receipts for expenses. Without receipts you have no proof of purchases made.

  Maintain a separate credit card for business purchases only; having a credit card with business and personal expenditures is definite red flag to government auditors.

  Have a separate business account for your deposits and your business expenses. There should not be any personal expenses whatsoever in your business account.

  Keep a daily sales log and a deposit book so that you can track sales deposits. This will reduce the chance of employee theft.

  Dual signatures should be required on company cheques. If only one person has signing authority, then that person has the ability to commit fraud by writing cheques for invalid expenses.

  Review and approval all employee expense reports before they are paid, which will keep spending under control.

  Wherever possible create separation of duties in the company, for example to same person who reconciles the bank accounts should not be the same person doing the deposits and writing cheques.

  Regularly backup your electronic financial data so you dont permanently lose it

 

Tip # 5 Hire a professional

Getting is right the first time can save you tones of dollars, dont cut back on getting your taxes done professionally with the goal of saving a few dollars, you may end up paying more in the long run.  Professional accountants have experience in multiple industries and companies and have a vast wealth of knowledge; they can identify items your staff may overlook.

 

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Accounting Tips for Small Business

Kirk M. Campbell
Certified General Accountant