Bookkeeping Best Practices
According to the CRA, “You may deduct all reasonable business expenses from your business income on your tax return.”
- No personal expenses coming out of the corporate bank/credit card accounts. We get that there may be the occasional slip up. If one is made by mistake please put the receipt in Hubdoc and “tag” personal purchase by mistake.
- Meals and Entertainment & gift cards are only meals & entertainment for the purpose of conducting, maintaining or obtaining business.
- Travel expenses same as above. These expenses are not for grabbing yourself lunch or a coffee because you are on business hours, or for “writing off” a vacation.
- You need solid documentation and we highly recommend not abusing these expenses. The claim value of M&E is only 50%, even for a client gift card. You don’t get to claim GST/HST on a gift card. If you give a client a gift card to a restaurant or a pair of tickets to a hockey game, those gifts are considered to be meals and entertainment expenses; as a result, you may write off half of their value.
- If you purchase a gift card for a client mark the receipt that you Hubdoc of who it is for.
- For your own business use You can either go with the convenience of using a card (no GST benefit) or you can make each purchase separately and put the receipt into Receipt Bank. No matter what you do you must have documentation of who/what/why you met marked on the uploaded receipts.
- You must still put the marked up GC redemption receipts into Receipt Bank but if there are no matches in the bank feed we will not expense them individually.
- You cannot double dip (make a purchase with a gift card – for you or your client) and then deduct the expense.
- If you are a GST registrant you can only claim an input tax credit for the portion of the expenses that are deductible for income tax purposes. For most meals and entertainment, the input tax credit would be for only 50% of the GST paid. The other 50% of the HST paid is not deductible for tax purposes.
- Use a mileage tracker. We recommend QBO. Make it easy so it gets done!
- Use an expense tracker or “tag” expenses in Receipt Bank that are business but paid personally. Mark on uploaded ones how they were paid (personal VISA, debit, cash). Again, this is not a great habit, but we realize it happens sometimes.
- Petty cash Must be considered a bank account, a rarely used one. Money withdrawn to be used as petty cash, upload bank withdrawal receipts and “tag” to petty cash. Expenses from petty cash, upload all receipts and “tag” to petty cash. Email us the balance in petty cash at the end of the month and we will reconcile.
- Cash drawer payouts (Retail clients) Any expenses paid out from the cash drawer, post picture of receipt in Receipt Bank note as cash drawer payouts. You will need a log of these as well to balance the till to the Z-Report. Petty cash float is much preferable to CDP/Os.
- Sales & payments Invoicing can be done in QBO or as a sales receipt to match POS transactions. Invoices/SRs are BCC’d into Receipt Bank directly from QBO . Payments are received into “Undeposited Funds” (or “Sales Clearing” if we have set that up) not into the bank account. Deposits are created by me using your uploaded picture of bank deposit receipts, note as deposits. Customer payment cheques go into Receipt Bank matched to the customer (aka vendor) name.
- Bills and payments No matter how you complete your vendor payments please make sure they are marked as completed in QBO.
- QBO bank feed Update it weekly, but please don’t do any matching or adding it in. Leave that to us. It can be our best friend or worst bookkeeping foe if not managed correctly.
- Due to shareholders & owners We need to make sure that this account is neither too high or too low. Keep the transfers to & from to a minimum. Post transfers in QBO or upload a confirmation with to/from noted when you transact them in the real world.
We appreciate how busy you are just keeping up with running your business, but we can make it more efficient and profitable if we have your full engagement to maintain useful, bulletproof books.
“It’s easier to stay caught up than to get caught up!”