I am behind in my bookkeeping

Stressed out from being behind in bookkeeping

Behind in your bookkeeping? A CPA's guide to getting caught up.

When you started your business you likely had some really big plans. Provide great customer service make lots of money and have more time to spend with friends and family.

Sometimes things don’t go as planned. Perhaps you ‘fell’ into your business as a result of a great opportunity or maybe you had a plan. In any case you didn’t intend for your accounting to get behind. After all, you aren’t an accountant. Maybe you even had someone helping you but they are long gone.

At first it wasn’t too bad, maybe one GST return was missed. Clients were paying and your suppliers were getting paid, so nothing that caused you worry.

Now fast forward to today and suddenly the books are way behind. You might be getting letters and phone calls from CRA. Maybe you aren’t getting letters and phone calls yet, but you know they will be coming soon.

Where to start?

  1. Set up your CRA online business account to see what has been filed and what is missing.
  2. Collect your business documents and receipts. Click HERE for a list of what you need
  3. Connect with a professional. Make sure who ever you work with is qualified. In Canada this would be a CPA (Chartered Professional Accountant) or a CPB (Certified Professional Bookkeeper).

How long does it take?

The next question on your mind might be how long will it take? Once CRA starts calling there is pressure to have things caught up quickly. A lot of that depends on you and how organized you are and how far behind things are. Getting all of your receipts together and organised BEFORE you connect with an accountant or bookkeeper will speed up the process. At my firm one year of bookkeeping and taxes can be completed in as little as 4 -6 weeks as long as we have all the information.

How much does it cost?

There are a lot of variables that affect the cost of your bookkeeping and taxes.

  • How many years you are behind
  • The state of completeness or organization of your documents
  • The volume of transactions
  • The number of bank and credit cards
  • Are items purchased with cash vs credit/debit cards or PayPal
  • Do you use industry software (BuilderTrend, MindBody etc)
  • Whether the information is provided electronically or via paper
  • Did someone else already do some of the accounting or is it a fresh start?

Can I go to jail?

This question does come up a lot. On occasion taxpayers do end up in jail. It just isn’t going to be the first conversation CRA has with you so be wary of any ‘CRA’ calls that suggest you are going to jail. Please check this link at the Canada Revenue Agency Website . CRA – Slam the scam.

 If you still aren’t sure, call your CPA if you get any suspicious calls from people claiming to be from CRA.

What information do I need to get started?

What information do I need to get started?

This list is a starting point, your specific situation may differ.

Business bank and credit card statements.
  • Many banks and credit companies provide this information online and can go back as far as seven years
  • Copies of cheques (often these are on your bank statements)
  • Listing of e-transfers sent and received
Documents that support your business transactions
  • Invoices that you have sent out to clients
  • Documentation for purchases you have made. Receipts, bills from vendors.
  • Loans that you have in the business name
  • Agreements that you have made that result in a financial obligation.
  • Lease, rental agreements etc.

Business Registration and incorporation documents.

Most recently filed Annual return (this is not your tax return)
Incorporation documents
Including:

  • List of shareholders and directors
  • business articles
  • Share structure and ownership
  • shareholder agreements.
Business registration and incorporation documents will be available from your lawyer.  If you self-incorporated you likely do not have all of these documents.
Previously filed tax and information returns
  • If incorporated your last filed Corporate tax return (T2)
  • If self-employed your last filed personal tax return with the T2125
  • Statement of Business activities.
  • Copies of GST/HST/PST returns filed
  • Copies of T4 Summary and T4s filed if you have payroll
  • Copies of any T5018 (contractor payments) filed
  • Copies of any T5 Summary and T5s filed for shareholder (if incorporated)
  • Copies of any correspondence received from the Canada Revenue Agency
  • Copies of any correspondence received from your province (if you are
  • subject to PST).

Note that some of this information may be available online at CRA or your Province.

It may take a while to collect all of this information, but the best place to start is to connect with a professional who can provide more guidance on what information is required for your situation and what to do if some information is missing.

Small Business Accounting Challenges

Small business problems

Small businesses have specific challenges and needs that are very different from larger more established companies.  Budget is typically a concern as small businesses and startups work to get their revenue streams established.  There is an additional challenge addressing the technical aspects of dealing with CRA – something many small business are just not able to do.

Here are some common issues:

  • Lack of understand of what is a deductible expense
  • Not understanding how GST works
  • Creating invoices that are not compliant with CRA
  • Recording revenue and expenses using Cash accounting methods.
  • Using old and outdated techniques in their business because of lack of awareness of better tools
  • Using the wrong business structure for their company (ie: incorporating too soon or too late)
  • Tracking vehicle expenses
  • Maintaining proper documentation for expenses
  • Missing or not understanding filing deadlines.
  • Not tracking personal injections or withdrawals of cash in their business
  • Using a personal account to run their business
  • Not registering for GST when required