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ATB Entrepreneur & Small BusinessNov 20, 2023 9:04:30 AM4 min read

Bookkeeping basics for small business owners

Paperwork is likely the last thing on your mind as a new entrepreneur—but laying the organizational groundwork is crucial.

ATB is hosting a free webinar called Stress-Free Bookkeeping for Small Businesses on Nov. 28, 2023. It will feature Nourel Belhadj, the director of Calgary’s SummitPath Bookkeeping with two decades of accounting experience.

What is bookkeeping?

Bookkeeping is the routine tracking and recording of financial transactions to monitor your business’ health. It involves keeping track of income, expenses, assets and liabilities, and may include payroll, vendor payment, payment collection and invoice creation.

Basic bookkeeping steps:

Step 1: Upload receipts and categorize transactions. 
Step 2: Reconcile account data to bank statements in your chosen software. 
Step 3: Produce and review financial statements, which include your:

  • balance sheet (assets, liabilities and equity)
  • profit and loss statement
  • accounts receivable aging report (what your customers owe you)
  • accounts payable aging report (what you owe vendors)

Bookkeeping is more than categorizing transactions—it goes beyond that with controls, processes and checklists.

Bookkeeper vs. accountant

A bookkeeper helps with day-to-day recordkeeping. They cannot give tax advice.
An accountant uses the data compiled by bookkeepers to provide financial advice and file taxes.

Why is bookkeeping important?

Whether you're a sole proprietor or corporation, you don’t want to drown in the daily grind, Belhadj said.

“If they try and do their own bookkeeping, it tends to bog them down and is taking away from the time they should be spending growing the business,” she said.

By keeping organized records, you are better equipped to secure financing, attract investors and fulfill obligations without the stress of last-minute scrambling or missing documents.

“You definitely want to always be ready for tax time,” Belhadj said. When you’re proactive, you avoid interest, penalties and time-consuming catch-up.

How will you track who you owe and who owes you if your sole focus is growing your business? That’s where bookkeeping comes in.

“If you're too busy with the business, you may forget to pay a vendor, and now you don't have that product delivered,” Belhadj said.

You can build credibility with vendors, lenders and investors. Without that, you might not qualify for a loan or have answers for them about assets or margins, Belhadj said.

Bookkeeping helps you understand how your business is performing—you can see where your profits and losses are.

“How are you going to know when to hire help? What is your budget? What’s your cash flow?” Belhadj said. “The financial statements really give that visibility to the business owner to know how their business is performing and make informed decisions based on that.”

It helps you file GST and payroll remittances in a timely and accurate fashion.

Bookkeeping ensures you have the right controls and processes in place to protect against threats like fraud, Belhadj said. 

How to make it easier

Say no to shoeboxes

Belhadj warns against throwing receipts in a shoebox and handing them to your accountant at year-end because the ink will fade. For easy integration, she recommends putting everything in the cloud—like QuickBooks or Dext—where you snapshot a receipt and upload it immediately.

But if you don’t categorize those receipts, it’s akin to using a shoebox.

“Bookkeeping is important because you're not just accumulating data, you're actually categorizing it and making sure that it gets done on a timely basis,” Belhadj said.

Go digital

No spreadsheets, Belhadj said. Bookkeeping software is user-friendly and connected to your bank, which makes account reconciliation easier.

“If everything is manual, you're going to lose track of things,” she said.

Manual bookkeeping using spreadsheets takes longer than using technology and software to your advantage.

“With spreadsheets, any glitches or anything, you've lost your data,” Belhadj said. “At least when things are stored in the cloud… you don't risk losing the information.”

Don’t procrastinate

If you build habits and keep track throughout the year, you don’t have to think about bookkeeping longer than necessary.

“It takes less time when you're proactive than if you wait until the end,” Belhadj said. “Plus, you develop processes along the way to make things more efficient.”

For business owners, confidence in your books and current performance is worth more than procrastination risks—like not being prepared for tax season.

“Bookkeeping, at the end of the day, does relieve that stress, gives you the comfort and confidence in what you have, like how you're performing, that your books are ready,” Belhadj said.

"You don't have to worry about interest and penalties.”

How to choose a bookkeeper

When searching for a bookkeeper, ask potential candidates these questions:

  • What software do you use?
  • What is your experience in bookkeeping?
  • Do you have experience with my industry? In multiple industries?

Other considerations include how the bookkeeper’s personality fits with your company culture. Will you consider them a part of your team?

Conclusion: ‘One less headache’

You don’t necessarily have to hire a bookkeeper; you could take a course to learn best practices if you’re set on doing the books on your own—but, fair warning, business owners experience many pain points.

“The stress of growing a business, and there's a lot on their plate, so if you can take something off your plate and make sure that it's running smoothly, accurately and proactively, that's one less headache,” Belhadj said.

If you attend ATB’s webinar on Nov. 28, you will learn more about controls and processes, plus how to get organized with a bookkeeping checklist that outlines weekly, monthly, quarterly and annual tasks.