A Guide to Expense Tracking For Canadian Small Businesses
Bookkeeping usually isn't a business owner's favorite task. Regardless, expenses need to be tracked, and here's how to do it the right way.
And if you’re worried about adding yet another to-do to your plate, don’t stress too much! When you implement these useful tactics and tools, it’s easy to streamline the way you track business expenses. You’ll save time, reduce hassle, and stay on the right side of the Canada Revenue Agency.
What expenses do I need to track?
In essence, you want to track every single expense that represents a purchase used to run your business. This reduces your taxable burden, so it (literally) pays to track expenses judiciously.
Sometimes, it’s difficult to determine if an expense is deductible. For example, meal and entertainment costs that are incurred while taking a client to lunch are allowable deductions. The key is to take careful notes about who attended and the business-related purpose of the event.
Tracking how many kilometers you’ve driven for business is another area where business owners are often confused. Since many entrepreneurs use the same car for personal and business use, it can be tricky to keep track of everything.
Luckily, there are software tools that you can use to dramatically simplify the way you track.
How should Canadian small business owners track expenses?
Day-to-day expenses are often the trickiest to track, but downloading an app that helps you track expenses on the go is the best way to simplify the burden.
Everlance is one popular option that also tracks distance driven, and it can even link to your credit card account for seamless expenses tracking. Other small business owners prefer to use the same tool they depend on for general accounting purposes, which is why Quickbooks remains a popular choice.
If you choose a tool like Quickbooks, you still need to track distance, and MileIQ is another automatic distance tracking tool that makes it incredibly easy to track how far you’ve driven.
If you need some extra help with tracking business expenses, you can’t beat an on-demand virtual assistant. When you hire a virtual assistant, it’s like hiring your own administrative support person… for a fraction of the cost.
When do I need to have all of my expenses accounted for?
When it comes to filing your corporate Canadian tax return, the accepted rule of thumb is that you must file your return no later than six months after the end of every tax year. In most cases, the fiscal tax year runs from 1 April through 31 March (but it’s still January 1 through December 31 for citizens, and income taxes follow the standard calendar year).
However, Canadian businesses may also request a change to their fiscal year calendar. This is common amongst seasonal businesses, who often request a fiscal year calendar that better aligns with the nature of their revenue stream. Learn more about changing your business’s fiscal year here, and be prepared to provide your reasoning for the request.