Back to Blog
If you don’t have a good bookkeeping system in place then your business accounting is going to be in trouble. This year tighten up your bookkeeping system so that you have an easier time managing the books and accounts, and paying the taxes.
Poor bookkeeping points to poor financial management, and that’s not how you want to run a business.
Here are 7 bookkeeping mistakes you don’t want to make.
1. Shoebox Bookkeeping
If you want to know what you are doing wrong in bookkeeping, then ask yourself if you are shoebox bookkeeping. This usually involves taking an empty shoebox and putting, throwing, or dumping, your financial paperwork in the box.
Shoebox bookkeeping is not bookkeeping.
2. Manual System and Spreadsheets
A manual book system and spreadsheet is a good way to track financial information. However, spreadsheets fall short when it comes tracking where your funds come from and go to.
Spreadsheets are great from simple tracking, but complex tracking where funds are being transferred back and forth, from and to multiple accounts, makes it difficult to keep track through spreadsheets.
It’s better to utilize a bookkeeping software.
3. Not Being Involved
As a business owner, delegation is a key way to get things done. You don’t have to know everything, but you should know enough to understand what’s occurring. This applies whether it is marketing, sales, app develop, or accounting.
Not being involved in the bookkeeping of your business would be a big mistake. Be involved and learn. Even if a professional accountant sets up your bookkeeping system, you should know it in and out. This is especially vital if you need to find something on your own, or you are hiring another accounting service.
4. Not Reconciling Accounts
Through reconciling, your business is able to match the statements in your financial accounts to the general ledger in your bookkeeping system. It is a simple step to prevent mistakes in your bookkeeping system, creates awareness of your cash flow situation and averts failed payments or bounced checks.
5. Combining Personal and Business Funds
When you run a small business or a one-employee business, combining your personal and business funds removes the processes of opening up a business account and all that goes along with it.
Bookkeeping, accounting and filing taxes can get quite messy when you combine your personal and business funds. You may miss out transactions and misfile financial papers. This can have severe consequences and you may be breaking the law. Corporations are expected to maintain a separate account from any personal account.
6. Lack of Digital Bookkeeping
More and more financial trails and transactions occur through digital mediums. Your bookkeeping system should be equipped for this. There are a variety of accounting applications that synchronize with your business’s mail and shopping cart to provide a streamlined bookkeeping system.
7. DIY Attitude
Learning bookkeeping is not a process of making mistakes and learning from them. Making mistakes will have serious implication for your accounting and bookkeeping system. You don’t want fines levied on your business for missed taxes or wrong entries.
The biggest mistake is not hiring a professional accountant. Get in touch with ATS Accounting avoid these mistakes and more!
Back to Blog
When you run a business, you have to maintain the books. Without good bookkeeping you won’t be aware of the financial health of your business, you will be unaware of the taxes owed and you will break compliance rules.
Here’s how you can create a great bookkeeping system.
Despite the digital age, a lot of paperwork does still occur. You need to ensure that you file your paper receipts, bills, and bank statement are filed in the folders.
If you want to be able to find your documents easily later on, you will label your folders. There are a number of ways you can label your folders. You can do it on the basis of financial account, status of the payment, or income-expense.
Conducting your bookkeeping processes in an order helps.
Ideally, you should create copies of all your financial documents. However, today, most opt to digitize everything. In such a case, ensure you have a backup of all the information. Don’t keep all your information locally stored. Storing on a safe and secure cloud server is a must.
Use a Bookkeeping Software
There are many bookkeeping applications available. Many of them are free or affordable. Bookkeeping applications offer you a structured and easy way to maintain your books and accounts.
From tracking expenses, creating estimates, synchronizing mail invoices, to tax assistance, they come with tons of features.
Single or Double Entry
These are the two most common forms of bookkeeping.
If your business is a small one and does not tackle large volume transactions, then single entry might be right for you.
Ensure that you utilize your bookkeeping system and keep updating your books. It’s best that you set weekly or monthly deadlines.
Consult with a Professional
It is always best to consult with a professional accountant. Making a mistake in bookkeeping can have serious repercussion. You want to ensure that your bookkeeping system is foolproof.
When you face trouble with setting up your bookkeeping system, reach out to ATS Accounting. We’ll be more than happy to help out.
Back to Blog
One of the most interesting questions we get asked are "Should we bother with our financial statements?", or, "Do we need to have financial statements?"
The answer to both those questions is yes. Year after year we get asked by new entrepreneurs and year after year, the answer remains the same. Ask an accountant this question and you’ll see a flash of bewilderment across her face along with the muttering of, "performance measurement" and "of course you need to!".
Let us break it down even further and give you a thorough explanation on why you need financial statements.
There’s a reason the accountant muttered "performance measurement" along with financial statements. Do you want to know if your business was, is, and will be successful? Well, your financial statements will provide that information.
Financial statements provide detailed financial information of your business; from the minutest detail of stationary purchases to high level payments received from clients. Financial statements allow you to have accurate accounting, and accurate accounting decreases the cost businesses have to pay for capital.
Provides Diverse Financial Information
Cash flow is your business’s income statement. It cannot be calculated without your financial statements. Your financial statement gives a thorough list of funds being transferred in and out of the business.
This is just one of the many information points your financial statements will provide. There are many types of financial statements for a multitude of accounting. A one-size-fits-all approach does not work. From cash flow to balance statements to retained earning to understanding the underlying realities of your business, financial statements are necessary for each one.
No matter which industry you are in, you are expected to have financial statements. Whether you are trying to get a loan or attract investors, you are expected to have financial statements. Potentials partners, investors, and lender agencies want to have a look at your financial statement to assess your business.
You are expected to have financial statements.
CRA, also known as Canada Revenue Agency, requires you to have financial statements. You can’t file your corporate tax returns without providing your financial statements. Failing to file your corporate tax returns within three months of the financial year end will bring upon interest on the tax owed. Wait beyond six months and late filing penalties will be charged.
Financial statements are usually prepared on a monthly or quarterly basis. How often you do it depends on the volume and amount of financial transactions your business has. Monthly financial statements ensure that your business has up-to-date statements.
Back to Blog
Whether you run a global multi-corporation or a mini-store from your basement, your business needs to have accounting and that includes bookkeeping and balance sheets.
When you finish accounting all the sales, expenses, debt and everything else, the assets and liabilities need to match up. If they don’t, there is either something wrong with your accounting, or something wrong with your business.
Assets, Liabilities and Equity
Before moving further, let’s understand what assets, liabilities and equity are.
The Accounting Equation
Your balance sheet is based by THE accounting equation, which is:
Assets = Liabilities + Equity
If the left hand side and right hand side of this equation don’t match, your company finances are not in order.
Double Entry System
The double entry system is the most widely used bookkeeping system, and your assets and liabilities should match when you use it. This system basically creates two transaction accounts for a company. Money borrowed from the bank increases the cash account (asset) and in turn, the loans payable (liability) will increase.
Hence, your liabilities and assets need to match.
Why don’t your liabilities and assets match?
Here are two main reasons why this occurs.
Get Professional Help
It can be really difficult to say what’s going wrong in your accounting without taking a look at your books. Get a professional accountant to have a look at your books. The problems can stem from a simple one of bookkeeping management to a complex mistake of missing out on some liabilities and assets.
ATS Accounting provides professional help to ensure that new businesses get their accounting right.
Back to Blog
It’s Christmas and New Year’s, so chances are you’re going to be spending more time at home than at the office. When you are at home, you have to deal with parenting responsibilities, and one of them is just teaching your kids to budget. If you just finished taking care of the year end accounting at work and setting up your budget for next year, you will be adept at budgeting right.
BUT teaching kids is a whole other ball game. Here’s how you do it right.
Why should they budget?
Whether your children ask you or not, you should answer this question for them. If you don’t, then they might not really see the use of budgeting. So here is what you do.
Sit Down with Them
Grab a pen, paper, a coloring set and sit down with your child. The best way to teach them is by showing them. Get them to list down their allowance and all their needs and wants. Next, help them out with the division.
Take a step back, let them complete the sheet first, and then sit down with them and provide feedback.
Go Grocery Shopping
Next time you go grocery shopping for New Year’s don’t let them just tag along, let your children help you with the budget. Hands-on experience is often the best teacher. Tell them your budget and what needs to be bought for your household. Then, at the grocery store, let them make suggestions on what to pick up and what not to pick up.
Teach According to their Age
Don’t teach a 15 year old how to budget like a 10 year old, and don’t teach a 10 year old to budget like a 15 year old. Get the age part wrong and your children may either be frustrated with you for treating them like a kid, or they’re unable to understand what you’re teaching.
Always account for your children ‘s age when you are teaching.
Make it a Habit
Every month or every week, sit down with your children and budget with them. The more they do it, the better they get. More importantly, by making it a habit, they will always be on top of their financial situation.
And, hey, don’t panic. Let your kids make their own mistakes, there is only so much you can teach them. If your child wants to blow away all the money on a toy, let him. The harder you push budgeting on them, the more they will run away from it.
At the end of the day, your children will be better prepared to face the world, and if one of them becomes an accountant, they’ll be a darn good one!
Back to Blog
Welcome to the world of accounting! If accounting is new to you, then be ready to face a barrage of new terms and concepts. The good news is that with a bit of patience, you can get a hang of accounting and run your business better.
Sales, EBITDA, PBT, PAT and EVA, are terms used in the business and accounting world. Knowing them ensures that you are running and managing your business as well as possible.
EBITDA is Earnings Before Interest, Taxes, Depreciation and Amortization.
A common mistake made with EBITDA is to assume that it represents cash earnings, which it does not. EBITDA is essentially your businesses net income, minus the expenses. EBITDA is effective for analyzing and comparing your business profit, not just in terms of expense and sales, but interest, taxes, depreciation, and amortization.
It can affect future financial and accounting decisions.
A basic equation of EBITDA is EBITDA = Revenue - Expenses (excluding interest, taxes, depreciation, and amortization).
PBT, or Profit Before Tax, combines all your company’s profits before tax. This includes operation, non-operation, continuing operations and non-continuing operations.
PBT is present in accounting because tax expenses are frequently changing, so PBT can help you get a good idea of the profits from year to year.
The basic equation of PBT is Net income - Income Tax expense.
Net Operating Profit After Tax (NOPAT) is your company’s potential cash earnings if its capitalization were unleveraged (meaning it has no debt). Capitalization simply refers to cost of assets, sum of corporate’s stock or invested capital, and outstanding shares multiplied by its share price (also known as market capitalization).
NOPAT is most often used in economic value added calculations.
A plain equation for this is, NOPAT = Operating Income x (1-Tax Rate)
Sales are an accounting basic. You note a sale when a financial transaction occurs between you and the buyer. Keeping track of your sales is a necessity, not just for accounting, but also for the growth of your business. You can keep track of which product or service has a high or low sales. This offers insight into the growth of your business.The core of your bookkeeping consists of noting down every sale that your company makes.
Economic Value Added or EVA is metric which measures a business’s financial performance. It is basically calculated by multiplying capital invested with weighted average cost of capital (WACC), and minus the net operating profit after tax. WACC is the average rate of return your company expects to compensate its different investors.
So, the equation reads like this, EVA = NOPAT - (Capital Invested x WACC).
These accounting terms and concepts are quite important for you to understand the financial situation of your organization. Furthermore, if you ever opt for a business loan,or try to get an investor, these are things that will be looked for on your accounting books to understand your business.