Bookkeeping health check

Why the score is about cost, not tidiness

Bookkeeping quality is usually discussed as a virtue, which makes it easy to ignore. It is more useful to think of it as a price. Books in good order make a year-end quick, which makes it cheap. Books that need weeks of reconstruction make it slow, and every hour of that reconstruction is billed at professional rates to do work that could have been done in minutes as it happened.

That is the first cost, and it is the visible one. The second is larger and rarely attributed: decisions made without numbers. If you cannot say within a few thousand dollars what the business has earned this year, then you cannot decide in November whether to buy equipment, pay a bonus, or adjust what you draw — because by the time the figure exists, the year is closed and every one of those options has expired. Most tax planning is only possible before year-end. Books that arrive after it turn planning into reporting.

The five areas, and why each one is scored

Reconciliation. An account that has not been reconciled is a set of numbers nobody has checked against reality. Unreconciled accounts are the most common reason a year-end runs over quote, because every discrepancy has to be chased individually, often a year after anyone remembers the transaction. A separate business bank account matters for the same reason: mixed personal and business spending has to be unpicked line by line.

Receipts and records. A deduction you cannot support with a record is a deduction you may lose if the CRA asks. Records generally have to be kept for six years from the end of the last tax year they relate to, and destroying them earlier requires written permission. Capturing a receipt at the moment of purchase takes seconds; recreating one two years later is sometimes impossible.

GST/HST. Registration is generally required once revenues pass the small-supplier threshold, and the obligation starts with the sale that crosses it — not at the following year-end, which is when people usually notice. GST/HST collected is money held on the CRA’s behalf rather than revenue, so a business that spends it during the quarter is borrowing from a creditor that charges interest.

Payroll. Source deductions are the least forgiving deadline a small business has. Regular remitters are generally due by the 15th of the month after the month the amounts were withheld, and late remittance attracts penalties. Worker classification belongs here too, because misclassification is assessed retroactively, with both the employer and employee halves of CPP and EI.

Year-end readiness. This is the summary of the other four. How much work stands between today and handing the books over is, almost exactly, what the year-end will cost.

Reading your result

The score is out of 100, and the three weakest areas are named because fixing in order matters more than fixing everything at once. Reconciliation usually comes first: several of the other problems are easier to fix once the accounts agree. If you want the gaps closed rather than described, catch-up bookkeeping is the service that does it, and a free consult is where to start.