Sometimes when you think about bookkeeping, a stereotypical scene crosses the mind of some people: a business owner handing over a giant box of financial records of every shape and colour, completely unorganized, to their bookkeeper. Although bookkeepers do not mind sitting down and going through each receipt (it is quite meditative organizing by dates and expenses), keeping your documents organized can help your business run smoother and you can sleep easy knowing that your information is safe.
Where can you start? For starters, having a designated space to keep your documentation should be step one. Depending on how much information you must store, you can start off with a three ringed binder with clear sheet protectors, a box with file folders in it, an expanding file folder, or a filing cabinet. Prices can vary on these products and can be found almost anywhere, from the dollar store, your local office supply store, and online sources like Amazon.
When it comes to organizing your records for your small business, organize your receipts by category. The CRA have the categories as follows:
Advertising and promotion (business cards, mailing lists, website development, social media ads)
Meals and entertainment (lunch meetings, dinners with clients)
Travel (airfare, auto expenses, tolls, mileage, lodging)
Rent (payments for leased office space or rented equipment)
Utilities (electricity, water, heat/air-conditioning, trash pickup for the workplace)
Communication (phone expenses, internet access)
Supplies (office materials, cleaning supplies)
Postage and mailing (PO Box rental, shipping fees)
Legal and professional fees (accountant/bookkeeper fees, attorney's fees)
Insurance (business liability insurance premiums, vehicle insurance)
Licenses and dues (business licenses, professional licenses, trade association dues, franchise fees)
Education (professional development, continuing education for professional licenses, job training for you or employees)
Ensure that the receipts you are organizing have the date, the total, and how the product was paid for, visible. If a description of the product is not available, writing one on the receipt would make your bookkeeper happy. Although it is not as important on receipts for office supplies, meals and travel can be a bit different. An example includes going to lunch with a client; include the client name(s) and the reason for the lunch date. Another example would be adding detail to a hotel receipt, such as why the stay and for how long. Adding a brochure to your travel receipt would be beneficial as well. Note taking is a great tool to ensure that you will remember the smaller details, because you never know when you may have to look back at something!
The next question is: when you should be filing your expenses? There are no rules for when you should be filing, however the sooner the better. You would like to do it while the information is still fresh in your mind. For some people, they file their receipts as soon as possible, while others organize at a specific time during the week.
In the end, there is no wrong way of organizing, and handing over a box full of receipts to your bookkeeper is not a bad thing. However, it will take time for your bookkeeper to sort through everything, and that time costs money. Make it a habit to sit down while listening to your favourite music, a coffee in hand, and enjoy your filing!