Keeping Regular, Up-to-Date Records of your Business’s Income and Expenses

by Greg DePersio

1 min read

Canadian tax law requires all small business owners to keep records of income and expense. Whether you hire a bookkeeper or accountant, or manage everything yourself, it pays to take an organized approach to recording and storing this information. The three main types of business records you need to keep relate to income, expenses, and property. Keep a record of all your gross income, whether received in cash payment, property or as services. Ensure each record notes the exact sum received, the date and the source. Examples of documentary proof include invoices, receipts, contracts, and cash register tapes. Also, keep bank deposit slips that provide proof of payments into your business account. Retain receipts or other evidence for every allowable purchase and expense related to your business, including invoices and vehicle logs. If your business is based at home, you can also claim a portion of your utilities, repairs and maintenance costs, insurance, and rent, so keep relevant records and do the calculations. Make sure records of purchases include the date, details of the seller (and the purchaser if you have employees), a description of items purchased or services supplied, and the seller’s business number if GST/HST registered. If you don’t have a receipt, record these details in an expense journal. To help calculate your claim for capital cost allowance, keep a record of any property you buy or sell, along with the cost, vendor, and date. Keeping information electronically is the convenient way to keep track of your business’s financial records. However, it is essential to also retain copies of the original paper documents. Be disciplined about setting aside time each week to file receipts and keep copies of invoices. Develop an accessible file system, such as binders with clearly labelled plastic pockets, and store records by type and in date order. Make sure your employees are equally well-organized. Taking a systematic approach to recording and filing of financial information helps you keep on top of your business monitoring and planning. It also prevents a last-minute paper chase, reducing stress at the end of your tax year.

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