Simple bookkeeping can be done by business owners, but it is advisable to have a professional perform the initial setup. When setting up your books, consult with your accountant to save time. These are the common circumstances that you should discuss with an accountant:
- Sales tax (GST, PST, HST): An accountant can provide important advice on when to register for sales tax and whether it is advantageous to register voluntarily (i.e. before you are required to do so). If you sell to customers outside of your province (or sales tax jurisdiction, generally), it is critical to understand aspects like what sales tax to charge on each transaction, how the tax is classified, and the impact of this classification.
Example: Sales taxes are more complicated that most people think. A bottle of plain water under 600 mL is taxable, while any bigger size is zero-rated.
- Payroll & Benefit: The calculation and administration of payroll and benefit can be complicated. It is essential to set up your payroll system properly in order to classify and calculate correctly.
Examples: The ideal compensation for owners is usually a mix of salary and dividends but the ratio depends on an individual’s circumstances. In terms of salary, owners can either pay themselves a regular salary throughout the year or a lump sum at year-end. The income tax withholding rates are different for each scenario.
- Manufacturing & Inventory: If your business involves manufacturing or holds a lot of inventory, it might be best to consult with an accountant. Valuing inventory and goods at various stages of the manufacturing cycle can require specific accounting policies.
- Multicurrency transactions: It is not unusual to incur expenses in a foreign currency (e.g. Canadian businesses may purchase goods or services in USD). If your business has a large amount of foreign purchase transactions or conducts sales in a foreign currency, a method to calculate the impact of foreign exchange should be in place. An accountant can provide advice on the processes for tracking, measuring, and recording foreign currency transactions. The process is usually informed by the tax treatment of such transactions although other options are available.
Remember, bookkeeping provides the data that will drive good business decision making. You can benefit by investing in support for your financial management!
Created by Novus Accounting & MoneySherpa