I was recently interviewed for a live online broadcast by Nancy Sievert, QB Training Experts Ltd. Nancy helps train entrepreneurs on using online bookkeeping programs, such as Quickbooks, to keep proper records. She can, essentially, keep entrepreneurs from having to talk to someone like me, who works in the bankruptcy industry.
It may seem odd that this blog post, and many of our posts, contain material that is intended to keep someone out of the insolvency system, but I think I speak for the community when I say that it is our desire to see people succeed. And that if they do need to take a detour through the insolvency system, then our objective is to help them find success on the other side.
During our broadcast we talked about the pitfalls that businesses fall into when they don’t have a proper record-keeping system in place, or aren’t adequately hands-on with the system that is in place, whether it is internal or external.
Some of these pitfalls include:
- Having to spend more time (and money) later on to take care of a neglected situation
- Lacking information to make informed and timely decisions
- Falling behind on tax filings
- Neglecting to make required remittances on time, or at all
The consequences of such actions include:
- Late filing fees and penalties
- Ignoring the warning signs of a troubled business
- Slow collection of accounts receivables
- Seizure of accounts receivables, bank accounts and other assets
Likely the largest mistake a business owner can make is trying to do everything themselves to save money when they lack the expertise and training to do so. But even those who turn their record-keeping over to third parties can run into issues. I have seen the devastation when the person hired lacks the expertise or the commitment to do what is required thus leaving a mess for the business owner to clean up. Choosing the wrong bookkeeper or accountant is not a valid reason, in the eyes of the CRA, to justify being behind in filings or remittances and likely won’t gain you any extra sympathy.
With today’s technology, there are so many systems that can be utilized to organize your finances in an easy and cost-effective way. Nancy talks about Receipt Bank, a very convenient app that allows you to upload your receipts into one place. Having seen the ‘plastic grocery store bag filing system’ that many have, this seems like a beacon in the fog.
We provided a pdf handout on 10 Elements of an Effective Record-Keeping System that I thought were worth a share here as well. I offer them along with a reminder to all of those entrepreneurs out there to check their record-keeping systems and ensure they have a rock-solid system to weather the storms, like the one we are we are currently in, and the ones that will undoubtedly show up in the future.
Elements of an Effective Record-Keeping System:
- Choose the proper record-keeping system for you
- Do your research. Talk to professionals. Explore the options.
- Designate one person to oversee data entry
- It could be you, a family member, employee or 3rd-party firm. Regardless of show it is, ensure you have some hands-on.
- Obtain the proper training
- Places like QB Training Experts Ltd. can provide customized training for those wanting to keep their bookkeeping in house.
- Have security measures in place to ensure information is entered frequently and accurately
- Any good accounting program will have checks and balances in place to ensure accuracy and defend against fraud.
- Scheduled time each week to maintain the system
- A little time now will save in time and money later
- Have a safe place to store and backup your data
- Data can be lost for a variety of reasons. If you don’t have proof of expenses, they can (and likely will) be disallowed in an audit.
- Ensure tax returns are filed on time
- Failure to file taxes puts you on the CRAs radar and results in extra fees. Better to spend that money on a good record-keeping system and be proactive.
- Set aside an estimated amount for tax remittances each month (approx.. 20% of revenue net of HST) and HST (15%) in separate accounts OR pay that amount to the CRA each month
- This is the ONE tip that can make or break a business. It is that important!
- Send the information to your accountant annually (for tax reporting purposes) or at another pre-determined interval for review and analysis
- Unless your business is accounting, you still want an accounting firm to review and file your returns.
- Congratulate yourself on a job well done!
- Don’t panic if you weren’t able to check off all of these. Meet yourself where you are. Set up a plan to put the missing systems in place.
My message to business owners is this: You don’t have to figure everything out alone. There are resources out there – online, in person – that can help you make the best decisions for you and your business. Reach out, have the conversations, whether they are from a proactive or reactive place. Your business, your creation, deserves that little extra attention. You deserve success. Your success benefits us all!