Your Small Business Year-End - Part 3 of 3: After Your Tax Return has been Filed
It’s almost December, which means year-end tax return season for a lot of small businesses. Unincorporated businesses are mandated to have a December 31 year-end by the Canada Revenue Agency but a lot of incorporated businesses choose to have a December 31 year-end, too. In this three-part series we’ve explored how to prepare for your year end and what the year end tax return process is. In this final post we’ll discuss what you should be doing once your year-end has been filed.
Sort and Store Your Paperwork
By law, small businesses are required to keep their year-end tax return supporting paperwork for a period of seven years after the end of the year. So, for your 2014 tax year you are required to keep all of your supporting documentation until the end of the year 2021. This includes copies of all of the invoices you print and send to your customers, any invoices that your suppliers send to you, bank reconciliations and credit card statements – anything and everything that you would need to support an audit in the case that CRA wanted to perform one. You can keep physical copies of these records (printed on paper) or electronic copies – as long as you can produce them if required.
There’s one special note about receipts that you might collect while buying things like food, office supplies and other store-based purchases: sometimes these receipts can fade over time because of how they are printed and how the material that they are printed on gradually discolours. Even though this is something that is beyond your control, you are still responsible for those receipts as part of your seven-year record keeping. Some businesses will scan their receipts and store them as image files or PDF’s. Again, how you choose to store this paperwork is less important than the fact that you are storing them and can reproduce them if your business gets audited.
And for more information on audits, please check our blog post series titled “All About CRA Audits”.
Planning and Budgeting for your New Fiscal Year
Once you’ve packed away the previous fiscal year it’s time to look ahead to a brand new year full of possibilities and potential!
If you subscribe to the old adage, “Failing to plan is planning to fail” then you should spend some time planning for what the next financial year might look like. You might want to project what you expect your revenues will look like and budget for what expenses you expect your business will have to pay for. Setting a budget and tracking it throughout the year will let you track if your business is on track and will allow you to take some corrective actions early enough if things aren’t going as planned.
How a Bookkeeper Can Help
Your bookkeeper can help you through the process of packing away your previous financial year once your year-end has been filed and in setting up a budget for your new tax year. A knowledgeable and experience bookkeeper can help make sure that all of the paperwork you would need in the event of an audit are sorted and carefully organized so they can be quickly accessed.
When setting your budget, your bookkeeper can help you review the past performance of your business and use that as a baseline for setting the budget for the upcoming year. Throughout the year, your bookkeeper can help keep your business finances up to date and can help you really understand how your business is performing so you won’t be surprised with any bad news (a net loss!) at the end of the year.
For more about the importance of creating a budget for your business, check out this blog post.
Once your small business year-end tax return is filed with the Canada Revenue Agency you should carefully file away all of the supporting paperwork as you are required to keep those records for a period of seven years. Once you have stored away your previous year’s documentation then it’s time to look ahead into the new year and set up a plan or budget you can track your businesses performance against.
Simply Bookkeeping1 provides professional bookkeeping services for freelancers, solopreneurs and owners of unincorporated and incorporated businesses. We customize our services based on your needs – we only see some of our clients a few hours a month but others we see on a more regular basis. Our services are reasonably priced and we tightly track the amount of time we spend working for you so you only pay for the services you get.
To learn more about us, please visit our website at www.simplybookkeeping1.com or contact Michele Hyde by phone at (647) 668 – 9363 or by email at firstname.lastname@example.org.
Have Your Say
If you’re getting ready to process your unincorporated or incorporated business year-end tax return, we’d love to hear from you. Tell us what best practices you’ve developed over the years and lessons learned (hopefully not the hard way)! Also, please share this article using the social media share buttons – chances are there are others out who could learn from your experience!