Imagine you are a small business owner, and it’s tax filing season in Canada. You realize there are no financial reports, bank statements, or income tracking, and Jack (one of your employees) is asking why he hasn’t been paid yet. Sounds chaotic?
All of this happens when you do not have proper bookkeeping for your small business’s financial data. Professional bookkeeping services in Mississauga, Ontario, come to your rescue and save you from a traumatic tax filing experience. Let’s explore what bookkeeping is and how it benefits your small business.
What Is Bookkeeping?
Bookkeeping is the process of keeping track of all your business’s financial data. It gives you an advantage no matter how large or small your business is.
A bookkeeper usually records daily transactions, including purchases, sales, receipts, and payments made by individuals, organizations, or corporations.
Standard Methods of Bookkeeping
There are two standard methods of bookkeeping:
- Single entry: This method records every business transaction only once.
- Double entry is an accounting system in which every transaction is recorded in two accounts—a debit to one account and a credit to another.
- For instance, if a business takes out a $5,000 loan, the cash (asset) account is debited by $5,000, and the outstanding debt (liability) account is credited with $5,000.
Benefits of Bookkeeping for Small Businesses
Bookkeeping serves as the back office of your business while acting as its backbone. Here are the top 7 benefits of small business bookkeeping services in Mississauga
- Accessible Financial Data
Bookkeeping helps you access organized and up-to-date financial data whenever you need it. This includes monitoring cash flow, transaction records, revenue streams, payroll management, and more.
It helps business owners access readily available data and saves time that could be invested elsewhere.
- Better Decision-Making
One of the major benefits of bookkeeping is that it assists you in understanding your business’s strengths and weaknesses.
You can use this knowledge to make better strategic and informed decisions. For instance, if you keep records of your investment and revenue for three months and notice that your investment exceeds your revenue—when the opposite should be the case—being aware of these statistics will help you tweak upcoming decisions for your business’s growth.
- Better Cash Flow Management
Bookkeeping can help small business owners analyze their cash inflows and outflows and identify periods of high and low cash flow.
Moreover, it helps you keep track of whether vendors or late-paying clients have settled their dues, allowing you to follow up on time.
- Effective Budgeting
Another major benefit of bookkeeping is accurate budgeting and forecasting.
Bookkeeping records provide insight into previous revenue patterns, cost trends, and cash flow variances, which serve as the foundation for accurate budget projections.
- Legal Compliance
Proper bookkeeping ensures legal compliance. A bookkeeper is responsible for accurately recording financial data and ensuring it complies with all applicable laws and regulations.
- Better Tax Prediction
As a small business owner, if you maintain effective bookkeeping, it will be easy to predict the amount of tax you owe to the Canada Revenue Agency (CRA).
This helps you stay ahead of industry trends and plan strategically.
- Easier Audits
Effective bookkeeping provides a detailed analysis of your financial activity through balanced sheets and statements. This streamlines the audit process for the auditor you hire. Not only does it speed up the process, but it also allows auditors to review financial records efficiently.
On the other hand, disorganized financial data can make audits challenging for both you and your company.
Cost of Bookkeeping Services
On average, bookkeeping costs in Canada range between $40 and $80 per hour. While the cost of bookkeeping services for small businesses may vary, you always have the option to choose a bookkeeper that fits your budget and quality requirements.
Key Takeaways
- Bookkeeping is the most effective strategy for keeping your financial data organized and ready for evaluation when needed.
- It helps you track your financial activities and ensures you stay ahead of tax filing requirements.
- If you’ve ever found yourself searching for “accounting and bookkeeping services near Mississauga, Ontario,” schedule your first consultation with Numeracy Accounting Solutions and experience the difference.
For more insights, check out our blog on How to Register Your Business in Canada and learn about the Expected Future Trends in the Canadian Accounting & Finance Industry 2024.