Tuesday, April 21, 2015

Canadian Taxes A to Z (2015): Q is for QuickBooks

In today's Canadian Taxes A to Z, Q is for Quickbooks. Seventeen letters down. Nine to go!

If you're running any kind of business that takes in more than a few thousand dollars a year in revenue, you should be thinking about electronic bookkeeping. Quickbooks is likely the leading small business electronic bookkeeping program, though it certainly isn't the only one. To be frank, it's featured in my title today because there aren't a whole lot of tax terms that start with the letter Q. And electronic bookkeeping will make your accountant and the Canada Revenue Agency happy, because you'll be able to defend any kind of later audit of your books be presenting well organized and balanced ledgers.

Accountants hate the "shoebox" school of bookkeeping, because it's very difficult to figure out based on a shoebox of papers exactly how much money you made after expenses for tax purposes. With electronic bookkeeping, each expense and revenue is precisely accounted for long before the accountant starts working on your taxes.

The main small business alternative to Quickbooks is Simply Accounting. Simply is a Canadian product, whereas Quickbooks comes out of the U.S. Medium and larger businesses use different (and much more expensive) bookkeeping and inventory control programs produced by other vendors, but for the small business world Quickbooks and Simply are the two leaders.

Good old Microsoft Excel spreadsheets can also serve you well, so long as they're properly set up for double entry bookkeeping. I used them for several years when starting my law practice.

Even old school double entry hand written ledger bookkeeping can still work, but it's a lot of hassle to find and fix mistakes. I know a few lawyers whose bookkeepers still use the method, but it comes with some inherent risks.

There are other software programs out there which sound like bookkeeping solutions, but aren't, even though they may have other nifty features. For instance, Canadian FreshBooks has a great cloud-based invoicing and billing program. But it's not a bookkeeping program, notwithstanding the use of the word "Books" in its name. Maybe one day it will do bookkeeping, but for now lacking a double entry systems and required ledgers means you can't get a full picture of your business financials from it.

There's also personal finance software out there, one of the most popular being Quicken from the Intuit makers of Quickbooks. It does a great job with household finances. Just don't confuse it with bookkeeping software.

No comments:

Post a Comment