Bookkeeping health check

Why the score is about cost, not tidiness

Bookkeeping quality is easier to judge as a price than a virtue. Clean books make a year-end quick and cheap. Books that need weeks of reconstruction make it slow, and every hour is billed at professional rates for work that would have taken minutes at the time.

That is the visible cost. The larger one is decisions made without numbers. If you cannot say within a few thousand dollars what the business has earned, you cannot decide in November whether to buy equipment, pay a bonus or change your draw. By the time the figure exists, the year has closed. Most tax planning only works before year-end; late books turn it into reporting.

The five areas, and why each one is scored

Reconciliation. An unreconciled account is a set of numbers nobody has checked against reality. It is the most common reason a year-end runs over quote: each discrepancy is chased one by one, often a year later. A separate business bank account matters for the same reason; mixed spending is unpicked line by line.

Receipts and records. A deduction without a record may be lost if the CRA asks. Records generally must be kept for six years from the end of the last tax year they relate to, and earlier destruction needs written permission. Capturing a receipt at purchase takes seconds; recreating it two years later is sometimes impossible.

GST/HST. Registration is generally required once revenues pass the small-supplier threshold, starting with the sale that crosses it, not the following year-end when people usually notice. GST/HST collected is held for the CRA, not revenue, so spending it during the quarter is borrowing from a creditor that charges interest.

Payroll. Source deductions are a small business’s least forgiving deadline. Regular remitters generally pay by the 15th of the month after withholding, and late remittance brings penalties. Worker classification belongs here too: misclassification is assessed retroactively, with both 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. Reconciliation usually comes first, since other problems are easier once the accounts agree. To close the gaps, catch-up bookkeeping is the service, and an enquiry is where to start.