Professional Accountants Share Key Tips To Set Yourself Up For Success Next Year End
When it comes to owning a business, there are many things to be aware of. Often, business owners learn the most valuable lessons the hard way. We're all about setting you up with the tools for success, and one of those tools is information. If you're new to staffing, payroll, or anything that falls under the accounting umbrella, you may feel confused, overwhelmed, or completely clueless. That's okay! We're here for you.
We spoke to our friends, Lesley McNamara and Brian Dunn, professional accountants and owners of Evolution Accounting. They offered us some top-notch advice for business owners who want to set themselves up for success next year-end. Here are some essential things to keep in mind.
Set Yourself Up for Success or Clean Up a Mess
When it comes to your business' accounting, being proactive is critical. If you don't take the following steps to prepare your business for tax season properly, you'll end up wasting a ton of unnecessary time and money cleaning up messes and working backwards. So, what does being proactive look like?
Don't Leave Room for Human Error
Lesley's top tip for business owners to do right now is to "use professional accounting software." She told us that "not using accounting software is one of the biggest mistakes people make. If they rely on excel spreadsheets, many expenses get missed. Or, GST may not be calculated accurately, deductions get missed, and they pay more tax than they should be." She continued to note that you simply can't remember everything, and good accounting or bookkeeping software can help you keep everything in order. Using spreadsheets leaves far too much room for human error, and you might find yourself hunting back through transactions and communications when it comes time to do your end-of-year reporting. The less room for error, the better.
Draw the Line Between Personal and Professional
One of the top tips that Brian always offers his clients is to "have two bank accounts. You should never mix your business and your personal finances, even if you're a sole proprietor. Have separate bank accounts for the business and a separate credit card," he told us. He said that folks who don't do this find themselves sifting through hundreds of items on a statement, having trouble remembering if transactions were business or personal. Beyond that, he recommended "At least two business accounts. One is for your day-to-day operations, and one is where you portion away when you get money. This is to cover things like GST and taxes at year-end."
Further to keeping things separate, Brian said that many people charge items that don't qualify as business expenses to their business accounts. "Many people include stuff they shouldn't and exclude things that they should have included." To get ahead of this, it's a good practice to familiarize yourself with what does and doesn't qualify as an expense for your business. If you charge something incorrectly, you don't have to worry as long as you stay on top of your record keeping.
Make that Paper Trail
While everyone makes mistakes, especially when navigating new territory, there's no significant cause for concern if you've kept track of everything in your accounting or bookkeeping software. "At least if we have all the information, we can sort it out and help teach them," said Brian.
So, be sure you know what you're doing when you grab that card and that you're drawing a clear line between your business and personal finances. Above all else, keep track of everything.
Beyond determining what is and is not a business transaction, diligent record keeping will help cover you in the face of an audit, a discrepancy at the end of the year, or any type of dispute or issue that requires proof.
Get Experts in Your Corner
Next up, assemble your team. One scenario where people often find themselves in trouble is when accounting issues follow what Brian calls a "do it yourself approach to incorporating their company." People make many mistakes during this process, such as not assigning themselves shares. While it does cost money to use a legal expert for this process, it can save you down the road. This is just one example of an expert that is beneficial to have in your corner. Some companies do a great job setting up your company that charges less than $1000. It’s money well spent.
This is also the case when it comes to accounting. Many folks take an in-house approach to their accounting. While that may work in the infancy of a business when things aren't busy, it might not be the best use of time as things pick up. If you're not an expert, someone can always do it more efficiently and accurately than you. So, it's worth deciding where your time is best spent during the accounting process and should you encounter errors down the road.
Lesley noted that you should "start to develop a team of professionals that you work with. An accountant, lawyer, insurance broker, etc. This way, you're building a team to support your success."
When it comes to business ownership and operations, it's important to know your limits. Just because you can do something doesn't mean you should. Freeing yourself to focus on your central business and doing what you do best is always a good idea.
Pay the Tax Man
As Brian put it, "don't forget to pay the tax man." All businesses are legally required to pay taxes, but here Brian is referencing the fact that a portion of all of your earnings needs to be allocated for taxes. He noted that many businesses forget about taxes and GST money until it's time to pay, which can be a massive blow if you haven't been preparing throughout the year. This all comes back to setting yourself up for success right now rather than scrambling to figure things out when time is of the essence.
What You Can Do Right Now
We know it's a lot to think about, so here's a little run down of the things you can do right now to set yourself up to succeed:
Find the best accounting or bookkeeping software for your needs and start a trial account to learn the ins and outs. You can absolutely test a few and ask around to see what your industry peers are using.
Assemble your roster of professionals. Start with identifying your greatest area of need and set up an intro call. This will help you understand if you need to work with this professional right now, down the road, or if it doesn't make sense for your needs. Keep going down the list and assemble your team over time. You don't need to have a huge lineup of professionals on retainer, but it's good to know exactly who to call and already have a relationship when the need arises.
Split up your personal and professional finances. Have a meeting with your bank to split everything up in a way that works best for you and your needs. Then, before you start transacting, do your research to determine which side of things all of your different transactions fall under. This is a great way to get ahead of potential issues.
Knowing When to Ask For Help
Now that you know what you can do on your own, here's when you should consider calling in professionals like Lesley and Brian.
If you're unsure where to start and need help arranging your business' accounting procedures, you might want to get in touch with a professional accountant right off the jump. This way, you're laying the groundwork for organization and optimization before you even get started.
Next, you need to engage a professional if you find yourself in a mess. If you're in over your head, it can be really difficult to even identify your errors, let alone rectify them. When in doubt, ask for help.
Last but not least, if you're finding that your accounting is taking up too much of your time and distracting you from doing what you do best (running your business), it's time to pass the baton.
"We really enjoy teaching people and helping them understand their business," said Brian. Lesley told us that "a lot of business owners feel very alone when they're out there doing this thing. They're really good at what they do, and they are experts in their field, but when it comes to their accounting, they can end up going in the wrong direction."
Evolution is all about making business owners know that they aren't alone. They're here to set you up for success. You get the benefit of expert support and a personalized understanding of your unique business, along with the tools and information to elevate your business even further.
If you're located in Alberta and you want to work with Evolution, head to their website and get in touch today.