When people start a business, they are not usually thinking about small business accounting…

Many people dream about the day they can work for themselves. They imagine waking up and doing whatever they want, whenever they want.

The reality, however, is that running a business requires a lot more than just dreaming - it also requires constant learning, commitment and strong systems. However, like many great things in life, the opportunities are incredible as long as you know how to plan ahead and prepare properly - no accounting degree necessary! And if you’re just starting up now, this is a great time to start off on the right foot and put systems in place to support clean financial records that will serve your business for many years to come.

If you've been in business for a while, it’s never too late to take a step back and make sure you’ve got the right financial foundations in place that will support the growth you’re striving for.

This post is the first in our series called, From Solopreneur to CEO

The purpose of this series is to touch on the 3 Keys that all Solopreneurs need to master to become a Money-Smart CEO: Foundations, Mindset and Knowledge. We’ll talk about how each of these areas come together to help you go from having a business, to running a business.

First up is Foundations…

Regardless of the stage of business you’re in, there is a direct correlation between understanding and staying on top of your finances, and running a profitable business.

Financial Foundations

We cannot overstate the value and importance of having strong financial foundations in your business. We also cannot overstate the benefits that come from creating good habits as early as possible! Trust us, it is much easier to keep a good habit going than it is to break a bad one.

Simply put: the key to running a successful small business, is a solid financial foundation.

So what do I mean when I say “Foundations”?

I’m talking about the systems, the process, we have in place that support us in tracking and having good visibility over our numbers. In this post, we are going to discuss a few areas where it is critical to have systems in place. They are easy to implement and will almost instantly result in you feeling more in control of your business accounting.

Separate Bank Account

While Corporations are required to have a separate bank account, if you are a Sole Proprietor, it may be tempting to just start running your business - depositing income and paying for expenses - out of the same bank account you have been using in your every day life.

Having a dedicated business bank account is important for many reasons (and does not have to be something expensive or complicated):

It simplifies your bookkeeping by not having to worry about backing out or excluding any personal transactions from your business ones.
In my opinion, it can help with mindset as well. Seeing your business finances separately, before paying for things like kids' clothes or groceries, allows you to see exactly how much you're making!
It allows for easier traceability in the event you are ever audited by CRA. Pro Tip: If you are using your personal bank account for your business, that cheque your grandma sends you every year for your birthday could be considered business income by the CRA.

So reach out to your bank and open that second account. And while you’re at it, open another one so you can start saving for taxes (something we’ll discuss later)!

Bookkeeping System

Like the bank account, this doesn’t need to be anything fancy or expensive. Even if it's something as simple as using an Excel spreadsheet or tracking your business data in Google Sheets, the most important thing is that you start tracking all of the in’s and out’s of your business.

Of course, there are small business accounting programs and software that can help you out. Personally, my favourite is QuickBooks. It's intuitive and simple to use, and has an app that can help you capture expenses as soon as you get a receipt! It also will link to your bank account so you don't miss anything.

Document Storage

Holding on to receipts is one of the best ways to audit-proof your business. Create one central repository (preferably not a shoe box!) where you can store all receipts, invoices, correspondence, etc. for your business.

CRA requires that you keep all documents for a minimum of 6 years. They also require invoices and receipts to be itemized (i.e. shows exactly what you bought and for how much).

I always recommend utilizing one of the digital receipt storage options such as Quickbooks Online, Hubdocs or Dext to make the process much easier.

Benefits of Implementing Strong Financial Foundations

The great thing about implementing the above noted systems and processes for your business is that you’ll start to experience results almost immediately!

Less stress at tax time

Like I said, the best way to audit-proof your business to is ensure that all of the documentation for all of your business transactions is store centrally. And the best way to pay less taxes? Track all of your expenses!

Easier to apply for financing or government grants

Being able to quickly generate reports that show your expenses and income will streamline any application process. This is true whether you are applying for government grants, business financing or a mortgage for your home.

Better Visibility & Ability to Plan

You have big plans for your business - but are they feasible? A good accounting system for your small business will help you determine if your plans are truly possible. You’ll be able to see what offering you have that brings in the most money, where you are spending the most, what your net profit is that tells you how much you can reinvest.

The visibility you’ll have of your results by implementing the above systems will immediately make you feel more in control of your business finances. Whether you’re trying to pull yourself out of a loss or just trying to maintain steady growth - with the information readily available, you’ll be able to make the strategic decisions that will drive your business forward.

Mindset

I’ve referenced the feelings you’ll experience of being in control, feeling empowered. Of course, all of these relate to Mindset; in particular Money Mindset.

This is a hot topic and is too important to glaze over. So stay tuned for our next post in the Solopreneur to CEO series - MINDSET.

From Solopreneur to CEO: Building Strong Foundations