Bookkeeping Basics for Small Business Owners: How to Stay Organized and Help Your Accountant

Good bookkeeping is the foundation of a successful business, reducing your accounting fees and preventing CRA issuing a re-assessment after a review. Whether you’re a freelancer, small business owner, or running a growing company, keeping your financial records in order helps you make better business decisions and saves you time (and money) when working with us at ModernAxis.

In this post, we’ll go over some basic bookkeeping principles and simple habits that will make life easier for both you and our team.

Keep Personal and Business Expenses Separate

One of the biggest mistakes small business owners make is mixing personal and business expenses. Having a separate business bank account and credit card is essential. Why?

It makes it easier to track business expenses.
It simplifies tax time and prevents unnecessary complications.
It helps ensure compliance in case of an audit.
It allows us to categorize expenses accurately, saving time and potential headaches.

If you accidentally use your business account for a personal expense (or vice versa), make sure to record it properly and reimburse the business accordingly. Keeping finances separate from the start will save you a ton of trouble down the road.

Understand the Shareholder Loan Account

If you own an incorporated business, you may have a shareholder loan account. This is used to track money that you personally take from or put into the company.

If you lend money to your business, it’s recorded as a shareholder loan liability (the company owes you money).
If you withdraw money that isn’t salary or dividends, it’s considered a shareholder loan asset (you owe the company money).

At the end of the year, we will determine how to treat these transactions to minimize tax implications. A positive balance may mean you have to repay the company or issue dividends from the company to the shareholders which will be a taxable income to the shareholders personally. Keeping clear records of these transactions will help ensure proper tax planning.

Stay on Top of Sales Tax (GST/HST/PST)

If your business is registered for GST/HST (or PST if applicable), it’s important to manage your sales tax properly. Here’s what you need to remember:

Charge GST on your sales: If you’re GST-registered, you must charge and collect sales tax from your customers.
Claim input tax credits (ITCs): When you pay for business expenses, you can claim the GST paid as an input tax credit to reduce what you owe.
Keep detailed records: Ensure your receipts clearly show the GST amount paid so you can claim it properly.
File and remit on time: Late filings or incorrect calculations can lead to penalties and interest charges.

We can help you determine if you need to register for GST, collect GST and the best filing frequency (monthly, quarterly, or annually), but it’s up to you to track and collect the right amount of tax.

Keep Your Receipts and Use Cloud Accounting Software

Gone are the days of storing shoeboxes full of receipts. Modern bookkeeping is easier than ever with cloud-based accounting software like QuickBooks Online or Xero. Here’s why using software (and keeping your receipts) is important:

It automates transaction categorization and bank reconciliations.
It helps you track income and expenses in real-time.
It makes tax season less stressful by organizing everything for us to review.
It provides clear financial reports to help you make better business decisions.

If you still have paper receipts, use a mobile app to scan and store them digitally. Canada Revenue Agency (CRA) accepts digital copies as long as they are legible and stored securely.

Reconcile Your Bank and Credit Card Statements

Regular reconciliation of your bank and credit card accounts ensures your financial records match your actual cash flow. Reconciling means checking that every transaction in your bookkeeping system aligns with your bank statements. This helps to:

Catch missing transactions.
Identify duplicate entries.
Prevent fraud or errors.
Ensure accurate financial reporting.

Try to reconcile your accounts at least once a month to keep things accurate and up to date.

Pay Yourself Properly

If you’re incorporated, decide whether to pay yourself through salary, dividends, or a combination of both. We can help you determine the most tax-efficient way to withdraw funds. If you take money out of the business without recording it properly, it could have unintended tax consequences.

For sole proprietors, ensure you’re tracking your income accurately for tax time. Setting aside money for taxes ahead of time will help you avoid surprises when you file your return.

Talk to Us When You’re Unsure

One of the best things you can do for your business is to communicate with us regularly. If you’re unsure about something—whether it’s how to record an expense, manage payroll, or handle sales tax—don’t wait until year-end to sort it out. Being proactive can prevent costly mistakes and give you a better understanding of your financial situation throughout the year.

We are here to help, and checking in with us periodically will ensure your bookkeeping stays on track. This also means fewer surprises and a smoother process when tax season rolls around.

The Bottom Line: Good Bookkeeping Saves You Time and Money

By staying organized, keeping business and personal finances separate, tracking GST properly, and using accounting software, you’ll make life much easier for yourself and for us at ModernAxis.

A little effort throughout the year can save you hours of work at tax time, help you avoid penalties, and even uncover opportunities to save money through tax planning. If you need help setting up an efficient bookkeeping system, reach out to us – we’ll be happy to guide you in the right direction!

By following these simple bookkeeping habits, you'll have a clearer picture of your business finances and set yourself up for long-term success. If you need personalized advice, we’re always here to help!

Disclaimer: This blog post is for informational purposes only and does not constitute professional tax advice. Always consult with a qualified tax accountant for personalized guidance.