#037 How to reconcile yourself with bookkeeping

Let's face it, bookkeeping is not a very exciting activity. It can even be a source of frustration and possibly friction between you and your accountant. But it is necessary and incredibly useful for maintaining the order and discipline you need to track your numbers.

Here are some things to consider to establish a more harmonious and beneficial relationship between you, your business expenses and your bookkeeping service provider.

Rigor

Bookkeeping consists of recording monthly income and expenditure transactions while ensuring compliance with the tax and accounting rules in force. To keep his commitment to you, your accountant must demonstrate unfailing rigor. It is she who establishes the basis of the financial statements which will be validated and signed by your CPA.

Your accountant needs two things to carry out the work you ask of them: your collaboration, and your purchase invoices or supporting documents.

Collaboration

Treat your relationship with the person who does your bookkeeping as if you were hiring a cleaner to do your laundry. This must examine each piece of clothing. She should also determine which pieces will be washed together or separately. She must also piece together the pairs of stockings coming out of the dryer and determine who each piece seems to belong to in order to distribute them to their respective drawers. It sounds easy, but a lack of communication can quickly land you in trouble. You fail to tell your attendant that a sweater doesn't fit in the dryer, oops. From then on, your daughter's favorite t-shirt was placed in your boy's drawer, and it's a crisis because she can no longer find it.

Likewise, you will encounter irritants if you do not provide your bookkeeper with all the information she needs. And if she doesn't question you to understand in which categories she should include certain expenses, you risk getting into trouble.

Here is a concrete example. One of our clients lost tens of thousands of dollars he had loaned to his business. In fact, accounts that had been incorrectly identified had to be removed from the books. It was impossible to trace the source of the money injection five years previously, which had not been recorded in the assets owed to shareholders.

Your bookkeeper must be turned on. In our world, it's often said that if your bookkeeper doesn't get on your nerves at least a little with their questions and validations, then you're not working with the right person.

Purchase invoices or supporting documents

In fact, your accountant will first ask you for your purchase invoices or supporting documents (written agreement or purchase receipt). Two scenarios often appear:

• either supporting documents are missing;
• or the supporting documents are not adequate.

Here are some types of expenses your bookkeeper will likely ask you about. You will make your life easier by preparing the right documents and clearly identifying the information that your bookkeeper will need in order to maintain perfect accounting records.

Purchase invoice or supporting documents

Your purchase invoices or supporting documents must be well detailed. Here's what they should include.

• Name of supplier or trade name of their company
• Date of invoice
• Invoice amount
• Amount of taxes
• Registration numbers for GST and QST files (for purchases over $30
• Buyer's name or business name for purchases over $150
• Payment terms for purchases over $150
• Description allowing you to recognize the good or service purchased

Some examples of what is not suitable!

A Shell debit OR credit payment statement shows the total amount paid. But does not prove how much was spent on gas and how much was spent on a snack. You must therefore attach the fuel receipt.

A credit card statement is not supporting documentation. Any expense charged to a business credit card without a cash receipt must be allocated to the “shareholder advances” account. For the person responsible for your bookkeeping, it is important to have purchase invoices or supporting documents!

For meals, only 50% of taxes are deductible. We must therefore be able to consult the tip portion on the receipt. However, you have to be careful because sometimes it is deductible, in other cases, not.

You cannot submit solo meals. Unless you are 40 km or more from your place of work and you have incurred travel expenses. Be careful, sometimes it's more or less, depending on the situation.

Expenses made on a personal credit card are accepted (invoices or supporting documentation are required, obviously). You must create an expense allowance for expenses paid with your personal card!

Some SaaS providers are registered for Canadian sales taxes. You will be able to claim these only if you obtain a detailed invoice including the GST/QST numbers.

Ultimately, the purchase orders do not go to Revenu Québec; you need the invoice. An example we often see and reject is the “Amazon” purchase order.

Credibility

The person responsible for your bookkeeping should check everything. This will then allow your accountant to sign your financial statements with complete confidence. A noted lack of supporting documents or clarity in your accounts may call into question the credibility of your financial statements by the accountant, who will issue a reservation. A reservation placed on financial statements is almost an invitation to the government to audit them.

To promote the health and credibility of your financial statements, your accountant should systematically seek to protect you. She should check the GST/QST numbers of all your suppliers one by one. Recently, this type of validation allowed us to catch a supplier in a fraud situation. He collected our client's GST/QST under GST/QST numbers that did not belong to him. And this is not the first time we have seen this type of problem.

To finish

Your bookkeeping provider works in your best interest. By having taken these few minutes to learn more about their work, you are now equipped to work more efficiently and harmoniously with whoever organizes all your numbers.