10 Essential Questions Every SME Owner Should Ask Their Bookkeeper for Financial Success

Understanding the financial aspects of your company is crucial for success. For small to medium enterprises (SMEs) in Ontario's vibrant cities like Hamilton, Toronto, and Mississauga, a strong grasp of bookkeeping and accounting practices can significantly influence growth. As a business owner, you may often feel overwhelmed by complex financial terminology, compliance requirements, and tax regulations. This is where professionals such as bookkeepers become essential. To improve your collaboration with these experts, we have compiled a list of ten important questions you should ask them.

1. How & When Do I Pay My Payroll Source Deduction?

Understanding payroll source deductions is vital for any business owner. These deductions include the remittance of employee Canada Pension Plan (CPP), Employment Insurance (EI), and tax contributions, along with employer contributions. It's crucial to note that payroll source deductions are due on the 15th of every month for the previous month’s payroll and are typically paid through online banking. By ensuring timely and accurate remittance, you not only comply with governmental regulations but also maintain a positive relationship with your employees by ensuring their contributions are correctly managed.

2. What Does the Profit & Loss and Balance Sheet Report Mean?

Financial reports are the backbone of any business, providing insights into your company's financial health. The Profit and Loss report, often referred to as the income statement, shows your net revenue after subtracting expenses from gross sales. This report is essential for understanding your business's profitability over a specific period. On the other hand, the Balance Sheet provides a snapshot of your company's assets and liabilities at a given time. Together, these reports offer a comprehensive view of your business's financial position, aiding in strategic decision-making and resource allocation.

3. HST – How Does It Work? How Is It Calculated?

The Harmonized Sales Tax (HST) is a crucial aspect of financial management for businesses in Ontario. Understanding how it works and how to calculate it is essential for compliance and financial planning. HST is calculated by subtracting the HST collected from sales from the HST on expenses. For instance, if you make a sale worth $113, $100 is your revenue, and $13 is the HST collected. If you spend $50 on a business expense like printer ink, $44.25 is your expense, and $5.75 is your HST expense (Input Tax Credit, ITC). The total HST owed is the difference, which in this case is $7.25. Proper handling of HST ensures that your business remains compliant and avoids potential penalties.

4. Why Do You Need to Provide Bank Statements if I Have Online QuickBooks?

While online tools like QuickBooks are invaluable for managing transactions, they do not completely replace the need for bank statements. QuickBooks imports transactions from your bank but does not categorize them into specific expenses or apply the correct tax codes, nor does it reconcile your bank account. Providing bank statements allows your bookkeeper to verify the beginning and ending balances for each month, ensuring accuracy and compliance in your financial records. This step is crucial for maintaining a clear and accurate financial picture of your business.

5. Can I Do My Own Bookkeeping?

While it might be tempting to manage your own bookkeeping to save costs, it's a task that requires a solid understanding of accounting principles and compliance with Canada Revenue Agency (CRA) regulations. Bookkeeping is more than just entering numbers into a system; it involves categorizing transactions accurately and ensuring compliance with tax laws. Incorrectly entered transactions can lead to costly errors, potentially resulting in thousands of dollars in lost revenue or penalties. Engaging a professional bookkeeper ensures that your financial records are accurate, compliant, and optimized for business success.

6. Can a Bookkeeper Prepare Tax Returns?

While bookkeepers are adept at managing day-to-day financial transactions and maintaining accurate records, they are not licensed to prepare corporate tax returns. However, they play a crucial role in working closely with qualified accountants to ensure that all financial data is accurate and ready for tax preparation. Bookkeepers provide the foundational data that accountants use to prepare tax returns, making their role indispensable in the tax preparation process. By collaborating with a professional bookkeeper, you ensure that your financial records are precise, which simplifies the tax filing process and helps avoid potential discrepancies.

7. Why Do I Need to Keep My Receipts if I Have My Bank Statements?

Maintaining receipts, alongside bank statements, is a vital practice for any business owner. According to Canada Revenue Agency (CRA) regulations, businesses are required to keep invoices, receipts, and bank statements for up to seven years. This is because your business can be audited within those seven years, and the CRA may request proof of invoices and receipts to verify expenses. While bank statements provide a record of transactions, they do not offer the detailed information that receipts do, such as the nature of the expense or specific items purchased. Keeping thorough records ensures compliance with tax laws and protects your business in the event of an audit.

8. How Long Do I Have to File Corporate Taxes?

Understanding the timeline for filing corporate taxes is crucial to avoid unnecessary penalties and interest. In Canada, corporate taxes need to be filed within three months from the end of the fiscal year if your business has made a profit. Filing within this timeframe helps you avoid penalties and interest charges. However, if your business has incurred a loss, you have up to six months to file without incurring penalties. Staying informed about these deadlines and working with a professional bookkeeper can help ensure that your tax obligations are met promptly, safeguarding your business from financial repercussions.

9. How Can Bookkeeping Help My Business?

Effective bookkeeping is a cornerstone of successful business management. By maintaining up-to-date and accurate financial records, you gain valuable insights into your business's revenue and expenses. This information is crucial for making informed financial decisions that can enhance your profit margins. Regular bookkeeping allows you to track financial trends, identify areas for cost reduction, and allocate resources more efficiently. Moreover, having a clear financial picture enables you to plan strategically for future growth and expansion. By partnering with a professional bookkeeper, you ensure that your business's financial health is continuously monitored and optimized for success.

10. How Often Should I Be in Contact with My Bookkeeper?

The relationship between a business owner and their bookkeeper is akin to a partnership, where open communication is key. Regular interaction with your bookkeeper ensures that all financial transactions are accurately documented and that you are informed about your business's financial status. It's advisable to maintain consistent communication, especially before making significant purchases or financial decisions, to maximize tax deductions and ensure compliance with accounting regulations. By fostering a collaborative relationship with your bookkeeper, you can effectively manage your business's financial landscape and make decisions that align with your strategic goals.

In the dynamic environment of business, understanding the nuances of financial management is not just beneficial but essential for success. As we've explored, asking the right questions can illuminate the path to financial clarity and operational efficiency. These inquiries not only enhance your understanding but also empower you to make informed decisions that align with your business goals.

For businesses in Hamilton, Niagara Falls, Burlington, Oakville, Beamsville, Ancaster, Binbrook, and the Greater Toronto Area, Bookkeeping Sense Inc. stands as a beacon of expertise and reliability. Our commitment to providing tailored bookkeeping solutions ensures that your financial records are compliant and optimized for growth. By leveraging our decade-long experience, we help you navigate the complexities of financial management, allowing you to focus on your core business activities.

Whether you're a new business owner or looking to refine your financial strategies, our free Zoom consultations offer valuable insights tailored to your specific needs. At Bookkeeping Sense Inc., we understand the unique challenges faced by SMEs and are dedicated to supporting your journey towards financial success. Reach out to us at adriana@bookkeepingsense.ca to discover how we can help you make sense of your numbers and drive your business forward.