Bookkeeping and document management can be gruelling tasks for many small business owners. Often, piles of paper collect on a small business owner’s desk with no plan to file, scan, or store them.
The problem is that this can go on for long periods before issues arise and things get fixed. Inevitably, something will happen—maybe a tax audit or you uncover fraud—and cleaning up the mess will be draining, very draining.
Small business owners should realize they can avoid this situation with the right technology and a savvy bookkeeper.
The Importance of Good Bookkeeping
Let's start with lousy bookkeeping. Bad bookkeeping can be worse than no bookkeeping at all. One of the challenges facing the bookkeeping industry is a lack of standards for managing the quality of bookkeepers' work. When I was employed with a large Big Four firm, we often depended on bookkeepers to assist with client work. I was amazed at the varied quality of bookkeeping work. This is where part of the inspiration for Enkel came from.
Ultimately, bookkeeping serves two broad functions: to provide useful information in a timely manner and to assist with regulatory compliance.
Though a bookkeeper will, in most cases, not be filing your tax returns (leave that to the experts!), being close to the details, they will be best equipped to ensure that a business captures all of its expenses.
However, the problem is that a bookkeeper who is not trained to look for the correct details can miss significant deductions or may not appropriately alert you or your accountant of opportunities they find when grinding through the details.
Attentive bookkeeping is essential to the success of any small business. It can limit much of the pain of an audit. If your books are up-to-date and accurate, you should easily prove to tax authorities that your financial records are appropriately stated for income tax filings. It is also worth noting that appropriate record-keeping is a legal requirement.
Furthermore, accurate bookkeeping provides valuable information. Timely financial information improves decision-making, financial analysis, and management. Access to the correct information at the right time makes reporting to investors and business planning much more straightforward. Simply put, attentive bookkeeping results in greater peace of mind and less stress.
Being Audit Ready
When clients learn they are being audited, they instinctively panic. Audits can be painful to small business owners and can consume many hours of otherwise productive time that could be used to grow the business.
Audits are a necessary evil in the tax system and will not disappear anytime soon. As a result, it is best to have a workflow in your business that helps you always stay audit-ready. You should also focus on making this process completely paperless.
With all your documents in the cloud, retrieving documents has never been more straightforward. No more time will be wasted on endless document searches.
These improvements in efficiency and productivity will positively impact your day-to-day activities, and if CRA audits you, you can easily access your vital documents. It is also worth noting that your virtual documents will be safeguarded from disaster; you can now back up your critical files without worrying about physical storage-related issues.
This can prevent a situation where you cannot provide an auditor with the documentation for transactions recorded in your accounting records.
Working with great tools like Xero and Dext allows you to incorporate good document management in your day-to-day processes.
Dext securely stores your receipts in the cloud for at least seven years, which complies with the document retention requirements of many tax authorities worldwide. Check here for more information.
Xero has an inbox feature, which is very handy. Each account has a designated inbox, so you or your suppliers can email invoices right into Xero. Your bookkeeper can retrieve them and attach them directly to transactions, making them easy to find if ever required.
So what should you do next?
A good starting point is to look for the right bookkeeper. Make sure you ask your bookkeeper about how they will help you store your documents more efficiently. Also, seek to understand their professional experience and internal quality control procedures.
The next step is to buy a good scanner. Realistically, you will continue to receive some paper invoices for the foreseeable future. Commit to yourself that you will scan the document as it arrives. It is key to have a good scanner for this; otherwise, you will waste a lot of time struggling with your scanner, and ultimately, you just will not get it done.
I recently purchased a ScanSnap scanner. These are expensive little gadgets, but they are great. The ScanSnap will make the scanning process much less painful, so it is worth the cost. Finally, it is time to get one of your employees or your bookkeeper to start scanning that big pile on your desk.
Feeling overwhelmed with the whole bookkeeping process?
There’s a solution for that! We at Enkel provide bookkeeping services for small to mid-sized businesses in Vancouver, Toronto, Calgary, and Edmonton that are looking to streamline their accounting processes and strategically utilize their resources. Contact us to learn more about how we can help you and your business thrive.
How We Select and Evaluate Our Recommended Software
We thoroughly research and test the apps we include in our regular workflow for Client bookkeeping services. After deciding on criteria for evaluating the software and then researching the app itself, we tested the app, noting its strengths and weaknesses. We then work with the app for at least a few weeks before deciding whether to recommend it to our readers. We use the software as it was designed for its intended tasks. For a detailed walk-through of how we select and evaluate software, please see the details of our process.
