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Do you have a small business? Are you looking for a guide on how to do bookkeeping for your small business? Then, you’ve come to the right place! This blog post will discuss everything you need to know about bookkeeping, from setting up your books to tracking expenses and revenue. We’ll also provide tips on how to stay organized and keep your books in order. So whether you’re just starting or running your business for a while, this guide will help you get the most out of your bookkeeping process!

In this guide, we will cover the following:

1. Why is bookkeeping important?
2. Bookkeeping systems
3. Setting up a chart of accounts
4. Connecting your bank feeds
5. Categorizing your transactions
6. Reconciling your bank and credit cards
7. How to keep accurate records to be 100% CRA compliant
8. Payroll
9. Invoicing
10. Accounts receivable and accounts payable
11. Automation tips and tricks for the advanced bookkeeper
12. Common mistakes you must avoid

Let’s get started!

1. Why is bookkeeping important?

Bookkeeping for your small business is essential because it helps you track the financial health of your business. By recording your income and expenses, you can see how much money you’re making and spending, which can help you make better decisions about your business. Additionally, keeping accurate records can help you stay organized and avoid penalties from the Canada Revenue Agency (CRA). Knowing how your business is doing and keeping your books accurate and up-to-date allows you to unlock growth potential. Accounting is the language of business, and numbers don’t lie! Your bookkeeping records tell the story of how your business is doing. You aren’t running a business if you aren’t doing your bookkeeping.

2. Bookkeeping systems

The first step in bookkeeping is to set up your books. You’ll need to create a system for tracking income and expenses, and you’ll also need to choose a method for recording transactions. Many different software programs and accounting methods are available, so research is essential to find the right one.

QuickBooks Online is a popular accounting software program for small businesses. It’s easy to use and has all the features you need to manage your finances.

Alternatively, Xero is another excellent accounting software option. It’s cloud-based so that you can access it from anywhere, and it has a wide range of features to help you run your business.

If you hold off on choosing an accounting platform, an alternative is to use excel to track your income and expenses. This is a fundamental method, but it can work if you don’t have many transactions. It’s a good start for beginners who want to prepare their books.

Once you’ve chosen accounting software, it’s time to set up your chart of accounts so that you can start tracking your income and expenses.

3. Setting up the chart of accounts

The next step is to set up your chart of accounts. This is a list of all the categories you’ll use to track income and expenses.

Create accounts to track all revenue, including sales, interest, and other forms of income. You should also keep track of all expenses, including operational costs, marketing expenses, and taxes.

4. Connecting your bank feeds

The next step is to connect your bank and credit card accounts to your bookkeeping software. This will allow you to import transactions automatically and save time on data entry.

Banks in Canada have recently undergone a major security overhaul, so in some cases, your bank feed connections may break. When this happens, an alternative is to import CSV files of your bank transactions.

5. Categorizing your transactions

It’s essential to keep accurate records of your transactions to quickly see how much money is coming in and where it is going. This will help you make informed decisions about your business finances and control spending. When done correctly, you can create financial forecasts and budgets to help you plan for growth in your business.

To stay organized, create a system for categorizing transactions. This will make understanding your costs and how your business is performing easier. You can create classes in QuickBooks Online or use Xero’s tagging feature to categorize your transactions so that you can track different projects or revenue streams separately. This allows you to break down various departments in your business. Not all revenue streams in your business will carry the same profit margin, so it’s in your best interest to classify your income and expenses so that you can run profit reports to see how each one performs on its own.

6. Reconciling your bank and credit cards

Once you have a system for tracking income and expenses, you’ll need to reconcile your accounts. This means ensuring that the records in your accounting software match the documents in your bank statements.

Reconciling your accounts is critical for bookkeeping because it helps you catch errors and prevent fraud. It’s essential to do this regularly, at least once a month. If you don’t reconcile your books, they will be messy at year-end, and your accountant will have difficulty preparing a tax return for you. The last thing you want is to miss recording expenses which means you will pay more tax than you should. It pays off, in the end, to know that your books are perfectly reconciled.

7. How to keep accurate records to be 100% CRA compliant

We highly suggest automating your bookkeeping function by using a platform such as Dext. This will save you time, money, and a lot of headaches in the long run if you ever go through a CRA audit. Dext connects to your accounting platform and allows you to publish pictures of your expenses into the cloud from your smartphone. You only need to snap a photo of the expense using your phone’s camera, and then it uploads directly into your accounting platform. There is some initial setup to integrate this app properly with your accounting software, so this step gets tricky. For that, we recommend speaking with a professional accountant familiar with the app and how to optimize it for best use. Accountants also get discount rates on the app, so take advantage of that!

If you are not using a platform like Dext, you must keep all of your receipts in an organized fashion in folders. For example, you can categorize expenses by month or vendor.

8. Payroll

If you have employees, you’ll also need to track payroll. This includes keeping records of hours worked, wages paid, and taxes withheld. Payroll can be complex, so it’s crucial to hire a qualified payroll accountant or use payroll software to ensure that you comply with all the rules and regulations. Using a platform like Wagepoint allows you to automate direct deposit payments to staff and CRA and manage compliance requirements such as paystubs and records of employment. Don’t prepare payroll manually! That method is prone to error, and even the slightest variance in your payroll account can lead to reviews or audits with CRA.

Not only do you need to track payroll for your employees, but you also need to track it for yourself if you’re paying yourself a salary. An alternative to salary is dividends, so it’s good to speak with your accountant to find out which method is best for you.

9. Invoicing

You’ll need to generate invoices and track accounts receivable if you’re selling products or services. This means keeping track of who owes you money and when they need to pay it.

Invoicing can be done manually in a word document or with invoicing through your accounting platform. Using an accounting platform is great because you can email the invoices directly to your customers and accept payment by credit card. This makes it easier for both you and your customer!

When invoicing, include all the relevant information, such as your business name, address, contact information, and GST number, if applicable. You can also customize your invoices so that they look professional.

10. Accounts receivable and accounts payable

It would help if you tracked accounts receivable and accounts payable. Accounts receivable is the money that is owed to you by your customers. Accounts payable is the money that you owe to your suppliers.

You can track this information manually or through your accounting software. For example, if you’re using a payment software like Plooto, you can set up recurring payments so that you never miss a payment. This is important because late payments can damage your reputation with vendors or suppliers.

It’s also important to track accounts receivable so you can follow up with customers who haven’t paid their invoices. You don’t want to wait too long to follow up because they may have forgotten, and you don’t want to put yourself in a situation where you are short on cash.

When you receive payments for your invoices, use the receive payment function and mark off your invoices as paid. It must be kept up-to-date because cash flow is critical to your business’s success.

11. Automation tips and tricks for the technical bookkeeper

There is so much automation that you can implement into your accounting process. Here are a few of our favorites.

Accounts receivable: Invoice Sherpa is a great tool that allows you to automate your accounts receivable process. It integrates with QuickBooks and Xero so that you can send invoices directly to your customers and track payments.  This will save you time collecting customer payments and help with cash flow.

Accounts payable: Plooto is a great tool that allows you to automate your accounts payable process. It integrates with QuickBooks and Xero so that you can make payments to your suppliers directly from the software.

Records of expenses: Dext is a great tool that allows you to automate your records of expenses. It integrates with QuickBooks and Xero so that you can track your business expenses and generate reports.

Payroll: Wagepoint is a great tool that allows you to automate your payroll process. It integrates with QuickBooks and Xero so that you can manage your employee’s payroll and benefits.

Time tracking: TSheets is a great tool for automating your time tracking. It integrates with QuickBooks so that you can track your employee’s time and generate reports.

Zapier: Zapier is a great tool for automating your accounting process by connecting different software applications. Zappier is the glue that connects your apps so that all your apps work off the same data set and there is no manual entry. For example, every business has specific apps for sales, CRM, and data management. Using Zapier, you make sure that you never have to enter the same data again across all platforms manually.

12. Common mistakes you must avoid

The biggest mistake people make when doing bookkeeping for small business is not keeping up with it regularly. This leads to a lot of missed transactions and a lot of headaches down the road trying to figure out what happened. If you track your income and expenses weekly/daily, then you never fall behind, and you know exactly how your business is performing. On the other hand, if you fail to keep up, it means your taxes may be filed late or filed incorrectly. In addition, you can’t make informed decisions on your business if you don’t know where it’s at financially. That is like trying to sail a ship without knowing the direction you are going.

Another mistake that people make is not keeping good records of their expenses. This can lead to problems come tax time or if you ever get audited.  If you can’t show CRA receipts or invoices of your expenses, they can deny your expense claims and demand you to pay tax, interest, and penalties. 

Another mistake is not using automation tools to help with the bookkeeping process. There are so many great tools out there that can save you time and money.

Some of the biggest mistakes in bookkeeping are failing to reconcile accounts, not tracking payroll, and not categorizing transactions correctly.

Conclusion

Bookkeeping is an integral part of running a small business. By tracking your income and expenses, you can make informed decisions about your finances and ensure that your business complies with tax laws.

However, by following these tips, you can avoid these mistakes and set your business up for success!

Thanks for reading, and good luck with bookkeeping for your small business!

If you have any questions, please feel free to contact us.

We’re always happy to help!

Contact Argento CPA today if you have any questions or looking for expert advice.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Understanding tax instalments requirements imposed by CRA is fundamental. This article will tell a story about Pam who was employed and earned a bonus from her employer that she used to invest in the stock market. She sold some stocks and earned a $30,000 capital gain during the year and had to pay $4,500 of tax on the gain when she filed her tax return. The next year she sold more of the stock and earned a $40,000 capital gain that she had to pay $6,000 of tax on the gain when she filed her return. She was then shocked when her accountant told her she not only owed $6,000 of taxes for the year, but that the CRA also required her to make instalment payments for the next year.

Why do I have to pay tax instalments?

The reason Pam is required to pay tax instalments is that taxpayers whose net tax owing is greater than $3,000 twice within a 3-year period are required to make instalments for the coming tax year. These instalments are prepayments of tax, similar to payroll taxes being remitted throughout the year on wages earned from employment, that would normally be paid when the annual tax return is filed.

How are tax instalments calculated?

There are three options of calculating tax instalments, no-calculation options, prior-year option and current-year option.

The no-calculation option is best used when your income, deductions and credits are similar from year to year. The CRA will determine the instalment amount based on details from your last tax return and they will send out a reminder to provide those details.

The prior-year option is best used when you expect your current years income, deductions, and credits to be similar to the prior year, but different from the year before that. You determine your instalment amounts based on the total payable from the prior year. If you make payments before the instalment deadlines you will not be charged instalment interest or a penalty, unless the instalment payments actually made are too low.

The current-year option is best used when your income, deductions and credits will be significantly different than the prior two years. You determine your estimated income for the current year and pay instalments based your estimated taxes owing for the year. If you make payments before the instalment deadlines, you will not be charged instalment interest or penalty, unless the instalment payments made are too low.

Payment due date

Tax instalments are required on a quarterly basis on March 15, June 15, September 15 and December 15. If this is the first time you’ve been required to make tax instalment payments, you’ll be required to make your first payment June 15 and your last payment March 15 of the following year.

If your instalment payments are late or too low, you may have to pay instalment interest and penalties when you file your tax return for the year.

How to make a payment

Instalment payments can be made using the same options as paying your annual taxes; online, in person or by mail.

Online

You can make an instalment online from your financial institution. To make a payment you log into your bank account, setup CRA as a payee using the “CRA(Revenue) Tax Instalment” option and enter your social insurance number as the account number. The processing time can be up to five business days so payments should be initiated well before the deadline.

In person

You can make an installment payment in person at your bank; however, you will require a printed personalized remittance voucher. The voucher is mailed to you by CRA with the instalment schedule.

By Mail

You can make an instalment payment by mailing your personalized remittance voucher with a Canadian cheque or money order

What happens if I don’t pay my tax instalments

If you don’t pay your tax instalments, you could be subject to interest and penalties. To illustrate this, we’ll provide different scenarios using Pam’s situation discussed at the beginning of this article.

Scenario 1

Pam was informed by her accountant and CRA that she is required to pay $1,500 on June 15, September 15, December 15 and March 15 of the following year, for a total of $6,000. Pam decides not to make these payments and during the year she purchased a rental property and earned rental income. This rental income resulted in additional tax owing of $2,300 when she filed her annual tax return.

To avoid instalment interest, she should have paid $575 ($2,300/4) per quarter. The tax instalment interest is then calculated from the day each payment of $575 was due, until the balance due date (or April 30^th) using the prescribed interest rate at the time.

She would also be subject to a penalty. Assuming her total instalment interest for unpaid instalments was $300, the penalty would be 25% x $300 / 2 = $37.50. Therefore, her total interest and penalty for not making any instalment payments would be $337.50.

Scenario 2

Pam was informed by her accountant and CRA that she is required to pay $1,500 on June 15, September 15, December 15 and March 15 of the following year. Pam forgets to make the June 15^th payment, but when she pays the September 15^th payment, she pays $3,000. She then makes the remaining payments on time. When she files her annual tax return the $2,300 net taxes from her rental income is offset by the $6,000 instalment payments she made, and she obtains a refund of $3,700. Even though she missed the first tax instalment payment, the catch-up payment made the following quarter eliminated or significantly reduced any instalment interest CRA would have charged.

Scenario 3

Pam was informed by her accountant and CRA that she is required to pay $5,500 on June 15, September 15, December 15 and March 15 of the following year for a total of $22,000. Pam decides not to make these payments and during the year she purchases a rental property and earns rental income. This rental income results in additional tax owing of $33,000 when she files her annual tax return.

To avoid instalment interest, she should have paid $22,000 ($5,500/4) per quarter. It does not matter that her actual taxes owing was more. She will only be subject to tax on the instalments CRA expected her to pay. The tax instalment interest is then calculated from the day each payment of $5,500 was due, until the balance due date (or April 30^th) using the prescribed interest rate at the time.

She would also be subject to a penalty. Assuming her total instalment interest for unpaid instalments was $3,000, the penalty would be the higher of 25% x $3,000 / 2 = $375 or $3,000 – $1,000 / 2 = $2,000. Therefore, her total interest and penalty for not making any instalment payments would be $5,000.

Contact Argento CPA today if you have any questions or looking for more expert advice when it comes to understanding tax instalments.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Small business owners are responsible for many essential tasks, from marketing and sales to bookkeeping and accounting. But one of the most important – and often overlooked – aspects of owning a small business is how to keep receipts and good records. Records are essential for ensuring your business stays organized and efficient, and they can also help you avoid costly mistakes.

But what are the correct records to keep? And how do you choose the right recordkeeping system for your business? This guide will walk you through everything you need about recordkeeping for your small business. We’ll cover everything from essential records to store and what to do if the CRA audits you. So whether you’re just starting or running your business for years, this guide will help keep your records in order.

1. What are the different recordkeeping systems available to small business owners?

2. What are the benefits of keeping good records for your business?

3. What are some essential records that every small business should keep on file?

4. How can you ensure your business’s recordkeeping system is efficient and effective?

5. How often should you review your records, and what should you do if you find any discrepancies?

6. What happens if the CRA audits you?

7. How can a bookkeeper help you keep track of your small business records?

What are the different types of recordkeeping systems available to small business owners?

The most common recordkeeping system is a cloud-based system like QuickBooks Online. This system is easy to use and helps you stay organized by storing your records in the cloud. Other recordkeeping systems include manual systems (which involve keeping paper files) and software-based systems (which require purchasing and installing software on your computer).

The type of system best for your business depends on your needs and preferences. For example, most companies prefer cloud-based systems because they’re easy to use and can be accessed from anywhere, while others prefer software-based systems because they have more features and can be customized to fit their needs.

No matter which type of system you choose, it’s essential to ensure it’s efficient and effective for your business. The design should be easy to use and understand, and it should also be able to handle the volume of records you’re likely to produce.

What are the benefits of keeping good records for your business?

There are several benefits to keeping good records for your business. Some of the most important benefits include:

1. Organized Records: A well-organized recordkeeping system helps you stay organized and efficient, saving you time and money in the long run.

2. Easy Access: Good records are easy to access when you need them, which makes it easier to track finances, make decisions, and respond to audits or other inquiries from the CRA.

3. Timely Updates: By regularly keeping track of your business expenses and income, you can ensure that your financial reports are up-to-date and accurate. This can help you make better decisions about where to allocate your resources.

4. Tax Preparation: Good records help make tax preparation easier and less time-consuming, saving you money in taxes or penalties.

5. Track Business Progress: By tracking the progress of your business over time, you can identify trends and areas where improvements need to be made. This information can help make future business decisions.

Some essential records that every small business should keep on file include:

1. Business License and incorporation documents: You must have a copy of your business license and incorporation documents on file. This includes a copy of your shareholder registry.

2. Tax Returns: You should keep copies of all your tax returns and related documents, including T4s and T5s.

3. Employee Records: You should keep records of all your employees, including their contact information, wage information, and any benefits they receive.

4. Accounts Payable: You should keep a record of all your accounts payable, including the vendor name, invoice number, and date paid.

5. Accounts Receivable: You should keep a record of all your accounts receivable, including the customer name, invoice number, and date billed.

6. Receipts and invoices: You should keep a record of all your receipts and invoices, including the date, vendor name, and amount paid. This information can help you track your business expenses and income over time.

How can you ensure your business’s recordkeeping system is efficient and effective?

You can do a few things to ensure your recordkeeping system is efficient and effective for your business. First, make sure the system is easy to use and understand. If you struggle to use the system or don’t understand how it works, you’re likely to skip using it altogether, which can hurt your business in the long run because your books will become a mess!

Second, ensure the system can handle the volume of records you’re likely to produce. If you’re manually entering your transactions and spending a significant amount of time on that, the system isn’t working efficiently and could use an upgrade to a cloud-based version.

Finally, be sure to update your records daily/weekly or at least monthly. This will help ensure that your financial reports are accurate and up-to-date.

How often should you review your records, and what should you do if you find any discrepancies?

Ideally, you should review your records on a daily or weekly basis. This will help ensure that your financial reports are accurate and up-to-date. If you find any discrepancies, take the appropriate steps to correct them. This could include contacting the vendor, changing the invoice date, or adjusting the amount paid. The savvy business entrepreneur has a pulse on their numbers and knows exactly how profitable they are. You should too!

What happens if the CRA audits you?

If the CRA audits you, they will review your records to ensure they are accurate and up-to-date. If they find gaps in missing information, you may be subject to penalties or fines since you won’t be allowed to make tax deductions for expenses without a receipt. Therefore, it’s essential to ensure your records are accurate and up-to-date to avoid any penalties from the CRA.

How can a bookkeeper help you keep track of your small business records?

If you’re not experienced in bookkeeping and accounting, keeping track of your small business records can be challenging. A bookkeeper can help you stay organized and ensure that your documents are accurate and up-to-date. They can also help you prepare for tax season and ensure you’re taking full advantage of all the tax deductions available.

If you’re interested in hiring a bookkeeper to help you with your small business on how to keep receipts and records, shop around and compare prices. Ask for referrals from friends or family members who own businesses, or contact us!

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Small business owners have a lot on their plate. Not only do they need to worry about the day-to-day operations of their business, but they also need to make sure that their finances are in order. This is where having a good bookkeeper comes in handy. A good bookkeeper can help you keep your books organized and up-to-date and can help you make more informed financial decisions for your business. So how do you go about finding a bookkeeper that’s right for your small business? Here are some tips!

What to look for in a bookkeeper

When looking for a bookkeeper, you must consider what you need them to do for you. Some of the things you should look for include:

1. Experience – It is crucial to find a bookkeeper who has experience handling the finances of a business similar to yours. This will ensure they have the knowledge and skills necessary to help you grow your business.

2. Knowledge – A good bookkeeper should have a strong understanding of accounting principles and keep your books up-to-date.

3. Efficiency – A good bookkeeper can handle your finances in a timely and efficient manner, so you can focus on running your business.

4. Trustworthiness – Finding a bookkeeper you can trust with your confidential business information is vital.

5. Availability – Make sure the bookkeeper you choose is available when you need them and has the time to dedicate to your business.

Finding the right bookkeeper can be daunting, but it is worth taking the time to find someone who can help you grow your business. By considering the above factors, you should be able to find someone who is a perfect fit for your needs!

Benefits of having a good bookkeeper

A good bookkeeper can help you keep your finances in order and make more informed financial decisions for your business. Here are some of the benefits of having a good bookkeeper:

1. Peace of mind – Having a good bookkeeper can rest assured knowing that your finances are in good hands. This can be a great relief, especially if you are unfamiliar with accounting principles.

2. Time savings – A good bookkeeper can handle your finances quickly and efficiently, so you can focus on running your business. This can save you a lot of time and stress!

3. Accuracy – A good bookkeeper will keep your books up-to-date and accurate, which will help you make more informed decisions about your business.

4. Growth potential – A good bookkeeper can help you grow your business by providing sound financial advice and keeping your books organized and up-to-date.

5. Cost savings – Having a good bookkeeper can save you money in the long run by helping you avoid costly mistakes made due to a lack of knowledge or experience.

Overall, having a good bookkeeper can benefit your small business. They can help you maintain your finances, make more informed financial decisions, and help you grow your business. So, if you want someone to manage your small business finances, consider hiring a good bookkeeper!

Tips for working with a bookkeeper

Once you have found a good bookkeeper, there are some things you can do to make sure the relationship works well for both of you:

1. Establish clear expectations – It is vital to establish clear expectations with your bookkeeper regarding what they will do for you and when they will do it. This will help ensure that both of you are on the same page and that there are no misunderstandings.

2. Communicate frequently – It is also essential to communicate frequently with your bookkeeper, especially if there are any changes in your business or if you have any questions or concerns. This will help ensure that they are always up-to-date on what is going on with your business and that any issues are resolved quickly.

3. Give them access to relevant information – For your bookkeeper to do their job effectively, they need access to accurate and timely information about your business finances. So be sure to give them access to all the relevant information they need to do their job correctly.

4. Review their work regularly – Finally, review your bookkeeper’s work regularly to ensure accuracy and completeness. This will help catch any mistakes or discrepancies and ensure that your books are in good order.

By following these tips, you can ensure that your relationship with your bookkeeper is successful!

Questions to ask potential bookkeepers

If you are looking for a bookkeeper to manage your small business finances, be sure to ask the following questions:

1. How long have you been bookkeeping? This will give you an idea of their level of experience.

2. What accounting software do you use? This will help ensure they are familiar with the software used in your industry.

3. Do you have experience working with a small business like mine? This will help ensure they understand the specific needs of a small business.

4. What are your rates? It is essential to know what to expect financially up front.

5. Are you available for ongoing support? Again, finding someone who can be there when you need them most is essential.

6. Can you provide references? References can help verify the quality of their work

Conclusion

Finding a bookkeeper and hiring the right one is a crucial decision for any small business. They can help you maintain your finances, make more informed financial decisions, and help you grow your business. So, if you are looking for someone to manage your small business finances, consider hiring a good bookkeeper!

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Since the start of 2022, construction costs have jumped by just over 8%. This increase contributes to the 33% increase in costs since the pandemic’s start. 

For construction businesses, these rapid changes are forcing reevaluations of how they run their business and especially how they manage their cash flow. 

A successful business demands a strong cash flow so as prices continue to rise, it’s essential you make it a priority. 

You can do this by identifying where problems begin and how those problems connect back to cash flow. 

This article will cover common problems in the construction industry and how prioritizing cash flow will help solve them. 

Common Problems in the Construction Industry (and How to Prioritize Cash Flow to Solve Them) 

Mismanaging Payroll

Payroll is a large portion of construction costs, often making up 20-40% of the total job cost according to The Construction Labor Market Analyzer. 

This means you have to have a significant amount of cash on hand to cover the labor costs as paying your workers should be a top priority for your business. 

However, many businesses run into trouble in this area because they don’t collect payments from clients until after the project is finished. This means they are required to dip into cash reserves to pay their employees and if they don’t have the proper amount of cash set aside, they can’t pay.  

How to Prioritize Cash Flow in this Situation: 

To avoid this problem, prioritize your cash flow by: 

• Collecting a down payment and/or progress payments for your projects.
  • Collecting a down payment will give you the flexibility you need to pay your labor costs throughout the project. 
  • Collecting progress payments ensures a steady inflow of cash throughout the project, again giving you the flexibility to pay your workers as you go. 
• Work with subcontractors
  • Many construction businesses outsource their labor because they don’t have to pay the labor costs throughout the project. Instead, it’s typically one lump payment after the job is complete. This means you won’t be paying for labor until after you’ve collected the full payment from the client. 

Change Order Inaccuracies 

Change orders are common in the construction industry. However, many businesses fail to create a sound process for managing them, which often leads to cash flow problems. 

In one scenario, the change to the project requires more work than what the client is paying. 

In another scenario, the cost of additional supplies isn’t properly accounted for. 

How to Prioritize Cash Flow in This Situation: 

To avoid this problem, prioritize cash flow by solidifying your change order process.

First, you need to verify that the change makes logical sense for your business i.e. are you still profitable? 

If the answer is no, you’ll need to rework the contract to ensure the change is still positively impacting your cash flow. 

If yes, then the key is efficiency. When a change is made, make sure you are quickly managing and processing the change order so you can resume work as normal and continue building your cash flow.

Mishandling Progress Payments

Most good job contracts will include progress payments. These are great tools to help you prioritize your cash flow, however, they can also lead to problems if:

• You’re falling behind on work
• You’re not allocating the cash properly as it comes in 
• You’re not collecting them on time

How to Prioritize Cash Flow in This Situation: 

To avoid this problem, prioritize cash flow by:

• Staying as close to “on track” as you can during the project
  • Many clients won’t make their progress payments unless your work is on track. If you’re not holding up your end of the deal you can’t expect them to hold up theirs. 
• Planning out how you want to use the cash 
  • Know exactly how and what you plan to use each progress payment for. Keep your cash flow in mind as you do this by timing expenses when they make the most sense for your cash reserves and completing the project. 
• Creating clear payment schedules and terms
  • Make sure you’re clients are aware of when progress payments are due and the repercussions of missing or falling behind on payments. 
  • Also, provide payment methods that the client prefers. 

Prioritize Cash Flow with the Help of a Trusted Accountant

Prioritizing cash flow can be challenging in the construction industry. Many factors play a role in creating and maintaining a strong cash flow. 

This means that as problems arise, like the inability to pay for labor, unprofitable change orders, and unaccounted-for progress payments, a focus on cash flow is often the solution. 

If you’re struggling to prioritize your cash flow or simply want better guidance on how to improve it, turn to Argento CPA.

We are experienced in the trades industry and can help you implement the systems and strategies needed to build a healthy cash flow and a successful business. 
Contact us today to learn more!

The construction industry presents plenty of opportunities for accounting mistakes. Many of these mistakes can be costly. 

Here are six of the most common accounting mistakes in the construction industry and why you must avoid them. 

1. Completing Undocumented Work 

Oftentimes, when a project gets underway, additional work is added or the original plan for the project changes. What was documented at the beginning of the project often ends up not being an accurate representation of the work you actually did. 

When these changes happen, it’s essential to follow proper documentation procedures. If you don’t write down the changes and report new pricing negotiations it often results in:

• Less profit 
• No profit
• A loss

The solution: Create a stronger process for mid-project changes. In this process, make sure your contractor has time to figure out the new price, document the changes, and send the info to the right person for invoicing. 

2. Inaccurate Job Costing 

There are a lot of different ways inaccuracies can present themselves in job costing. As you can imagine, mistakes in this area can affect profitability. Let’s take a look at some common job costing mistakes:

A. Not Knowing How Much Things Cost

It’s easy to try to estimate how much a project will cost along with the cost of equipment and labor. While your estimate may be close, even the slightest variation can lead to a loss of profit or cause you to miss out on jobs because of inaccurate bids. 

The solution: Turn to your income statement to review expenses. Ensure everything is accounted for and then create a detailed method for calculating costs for each project.

B. Misallocating Costs

Creating an accurate budget for projects can be complex. However, you should be able to account for each cost on every project. 

You’ll need to account for variable costs (costs that fluctuate, like in material and labor) and fixed costs (costs that never change, like rent, admin staff, and office expenses). When you factor in both types of costs, you’ll be ensuring you aren’t leaving profit on the table. 

The solution: Run through your financial processes and complete a detailed review. Before every project, make sure you are properly allocating your costs. Try allocating a percentage of your fixed overhead to your calculations so that you are taking everything into account. 

C. Fixed Costs in Bids

Another common practice for contractors is to include fixed costs in their job contracts. This can be a costly mistake. 

The market for materials and other expenses fluctuates quickly and when your costs are fixed in your bids, you could end up losing money. 

The solution: Remove fixed cost language from your bids and instead use language that will allow you to adjust the cost based on the market.

3. Cash Flow Mismanagement 

Cash flow mismanagement is a mistake in any business model but especially in the construction industry. 

In many cases, the business is required to cover the cost of the job until the project is completed. This leads to a negative cash flow for long periods of time. If your business doesn’t have the cash on hand to cover the job costs and other expenses, you won’t be around for very long. 

The solution: Ask for deposits on projects or negotiate vendor contracts to reflect an easier payment schedule for your business. This will ensure you have cash on hand to cover expenses.

4. Misunderstanding Joint Ventures

Working with other businesses can be a great way to bring value to your clients. However, they take a great deal of management on the accounting side and if you and the other business are not on the same page, it can lead to errors. 

The solution: Be clear on your expectations and how you plan to handle the accounting side of your agreement. Don’t forget to document all activities as well. 

5. Accepting Unprofitable Change Orders

Change orders can be great for business, but in some cases, they can be a costly mistake. 

Accepting unprofitable change orders is often a result of not fully understanding the scope of work before making changes on a project. 

Similarly to mistake #1, this leads to:

• Less profit
• No profit 
• A loss 

The Solution: Before you start any work, make sure your change order is fully processed and approved. This will ensure profitability for every change order. 

6. Not Working with an Experienced Accountant

Costly accounting mistakes are frequently made in the construction industry. In nearly every case, the negative results could’ve been avoided with the proper systems and processes in place.

The Solution: Work with an accountant with experience in the construction industry. They are well-versed in the procedures required to run a successful construction business and can help you put them into place to ensure profitability and success. 

They also know the best third-party applications to help your business’s finances run smoothly. 
If your construction business is ready to stop making these common accounting mistakes, contact Argento CPA. We will help you automate your processes and use real-time data so you can scale your construction business and avoid costly mistakes!

I want to tell you the story of Procrastinator Pete.

Pete was a charismatic young and healthy man full of energy. An electrician by trade. Pete was ambitious. His number one passion in life was being an entrepreneur and building something from scratch. And he was good at it too.

After earning his ticket as an electrician, Pete was so excited he could finally start his own company. It turned out to be a great success. 24 months into his business, he had already built up a great client base and hired 2 journeymen and 4 apprentices on his team. The reputation for their work was outstanding and well-respected.  

Pete was a jack of all trades and took pride in his skills. He was great at marketing, organized on the job, and delivered outstanding personalized customer service.  

However, the one thing Pete could have gotten better at was his procrastination. Pete hated administrative work and kept putting off a task on his to-do list “hire an accountant.”

One day Pete received a letter from the Canada Revenue Agency. He opened it up, and to his surprise, they let him know there was a discrepancy in his payroll remittances, and they wanted to review the last 12 months of pay slips.  

That night after work, Pete got to work on compiling the information for the CRA. Hours went by, and Pete had trouble re-calculating CPP and EI. It was now 2 am, and Pete still wasn’t finished. Plus, he had to be on-site at 6 am. Starting to feel flustered, Pete stopped working on the response to CRA and went to bed. The next day he showed up at work tired and exhausted from the lack of sleep the night before. In his exhaustive state of mind, he made a big mistake in some wiring and received a one-star Google review for that job. This was a shocker to Pete since he always had a good experience with his clients. 

Time went on, and Pete still hadn’t responded to CRA. Then, two months later, he received another letter in the mail. This letter said that Pete owed the CRA $27,000! Now in shock, Pete scrambled to figure out what was going wrong. It turns out that Pete neglected to calculate the payroll tax correctly. This was devastating for Pete, and his savings were wiped from this debt.  

This could have been avoided if Pete hadn’t been such a procrastinator and had hired an accountant and automated his administrative task of payroll.

“If you’re going to run a business and don’t understand accounting, you are already behind the eight ball.” – said Mark Cuban.

What Mark meant was that as an entrepreneur, you must understand the language of business. That language is Accounting. Your primary understanding of debits and credits and the difference between cash flow and net profits is crucial to your success.   

Most trade business owners don’t want to learn accounting or have anything to do with crunching numbers. That’s fine. However, somebody has got to do it. Therefore, it would be best if you had an accountant who could speak to you about your numbers so that you understand.

Where do you start?

You start at the same place as you would when building a new home—the foundation. The foundation of your accounting is a proper bookkeeping system. Without bookkeeping, you have no idea how your company is performing. 

“I do my own bookkeeping” – we get this statement a lot from our new clients. So why is doing your bookkeeping a terrible idea? You aren’t a bookkeeper. Stick to what you are good at—your trade. You wouldn’t find us trying to wire a home or install a new air conditioner. A do-it-yourself mentality means you are stepping outside of your specialty and making significant mistakes. This leads to the old saying, “garbage in, garbage out.” Your time is your most valuable asset, and best spent growing your business.

You don’t just want any bookkeeper. It would help if you had a specialist who does more than that. It would help if you had someone who would automate your accounting processes and deliver expert advice.  

Technology is changing the way we do business, and cloud applications are speeding up how all administrative tasks are performed. You can bet that your competitors are taking advantage of this, and you will be left behind if you fail to adapt. Therefore, you need an accountant who can advise you on what apps to use and how to get them to work together. In our world, we call this a technology stack.

Now that you have a solid foundation

“You can’t manage what you can’t measure.” – says Peter Drucker. With accurate bookkeeping, you can take measurements of where you are now and use that as a stick in the sand. With that, you can envision where you want to go and determine the gap from where you are now to where you want to get to. This is when you work with your accountant to create an action plan on how to get there.  

Avoid the 7 most common mistakes business owners make

1. They don’t plan
2. Don’t know (or understand) their numbers
3. Think they can play every role and don’t have the right team at the right time
4. Run out of cash
5. Lack of systems or failure to upgrade as they grow
6. Not knowing their customers, what they want and what they value – trying to be all things to all people
7. Ignore culture, core values, and brand

How Argento CPA will help

1. Explain your key numbers to success
2. Visually explain what small changes to key drivers will do to your profit and cash
3. Develop action plans to bridge the gap
4. Suggest what apps may be relevant to your plans
5. Hold you accountable
6. Provide insights and inspiration
7. Scale and help you grow your business
8. Give you the confidence to act

Contact Argento CPA today and get yourself setup for success from the start! Let this story of Procrastinator Pete be a good lesson!

Back

For those in a trade business, it is critical to have all of your business systems working at their best. 

Are they strong and compatible with each other? Are they helping you reach your business goals? Do you understand the processes and feel confident in their functionality?

Or are they competing against each other and leaving you frustrated with a lack of results? 

Now is a great time to take a closer look at some of the business systems you have in place to ensure they are built to help your company grow.

Automate Wherever You Can

Technology can handle just about all of the tasks you need it to do through automation. The more you turn over your manual task to a computer, the better off you’ll be. 

Automation gives you more time to focus on your operations and minimize frustrations along the way. 

Nearly every area of your finances can be automated, this includes:

• Job costings
• Bill collecting
• Internal communication
• Centralizing receipts and invoices
• Payment processing
• Bookkeeping
• Project management
• Profitability analysis
• Creating bids and change orders
• Financial forecasting
• Business planning
• Payroll management

Each of your business systems is able to operate more efficiently and accurately when they are automated like this. It eliminates the risk of human error and ensures timely completion. 

Automation also leads to better data and reporting, allowing you to make better business decisions.

Tools for the trade

Here are a few tools we (Argento CPA) recommend for trade businesses. They all work well together and offer industry-specific benefits. 

Knowify: This is a great place for trade businesses to start as you can then integrate most everything else into Knowify for easy management. It is designed for the trade industry and includes financial management, project management, invoicing, and much more.

QuickBooks Online: A must-have for most companies, this tech tool helps you with auto-tracking of your expenses and your income. It can also sync all of your transactions automatically. It will help you to create real-time reports and bi-directionally syncs to Knowify.

Wagepoint: For Canadian companies, Wagepoint is the go-to in payroll tools. It can help you with managing your employees’ benefits and sick pay, too.

Dext: This is a super easy tool to use for capturing your receipts. It can pull all necessary data into your logs for them as well.

Stripe: For those that need a tool to accept and send payments, Stripe is a go-to option that works for most needs.

Plooto: This technology solution automates your business’s accounts receivable and payable, pulling that information right from QuickBooks.

Keep Your Team in the Loop

As you begin to make these changes, know that it is always important to keep your team in the loop. 

If you are reworking existing systems or you are adding new tools, be sure your team is up to date on what is happening. You may need to provide training where necessary to ensure they can do their job at the best level possible. 

Keep in mind that your systems can only be as successful as the people who are managing them. Be sure to set them up for success.

Simplify Your Processes

Work to simplify any processes possible. The more complex your processes are, the more time there is for your employees to wait around for the information they need. 

Consider a total reboot. Look at each system and process you are using right now. Find out how you can make adjustments to see significant improvements in operations. When you do this, it lets you get the most out of your technology and makes things easier on your staff.

Carve out Time to Check-In on Your Business Systems

Get in the habit of regularly managing your systems. That is especially necessary for your finance systems. Be sure your data is still being tracked promptly and accurately and you are getting reports that help you manage your business. Look for any bottlenecks to work on. When you find them, see these as an opportunity to make improvements.

Make it a habit to do this type of check-in for your business systems. Doing so helps to make sure you have a pulse on your finance functions at all times and gives you insight into what is happening throughout your business.

Work with an Accounting Partner Experienced in Building Business Systems and Streamlining Finance Functions

Building your business systems and streamlining your finance functions is one of the best ways to improve efficiency and set your business on the right track for growth. 

Identifying which ones will work best and implementing them into your existing processes is the toughest part. For assistance, consider reaching out to Argento CPA. We are experienced in building business systems and streamlining finance functions for trade businesses. Contact us today to learn how we can help!

Every growing trade business needs the support of financial pros, and you’ve likely weighed the options of outsourcing CFO services or having a CFO in-house. 

Outsourcing can be a smart alternative to hiring in-house, especially for successful companies that are not of the size or complexity that requires a full-time CFO.

There are pros and cons to outsourcing CFO services that usually come down to properly fulfilling the business’ needs. We will cover both to help your trade business determine the option that works best for you.

Pros of Outsourcing CFO Services

Strategize Long-Term Goals and Why You Want to Achieve Them

While trade business owners, like yourself, are busy managing the day-to-day operations of their business, it can be easy for long-term planning to slip through the cracks. 

However, identifying your own personal, top priorities, allows you to then build a business that will help you reach your goals and serve as a representation of your core values. 

An outsourced CFO can help. They are planners that don’t just look at current financial statements but guide business owners to identify where they want their business to be in several years and then refine that vision. 

Once a complete picture exists, a CFO will use the numbers and help craft a vision of how to get there. 

The result is that you’ve then extended your financial, business, and personal goals; and as a result, can realign the present to get yourself to where you want to be.

Break Down Stretch Goals into Short-Term Action Plans

Breaking down your long-term goals into short-term action plans is essential for aligning the present and the future. You’ll start with your long-term or 10-year goal and work backward by crafting a 5-year, 3-year, 1-year, and finally 90-day goal. Because these 90-day goals are derived from your long-term goals, each time you accomplish a task, you’ll be one step closer to getting your business where you want it to be. 

As you can see, getting to this point requires a lot of planning and strategizing. This is where an outsourced CFO can really push you to reach your goals. They will collaborate with you to build 90-day goals, with your numbers in mind, that are relevant and achievable. Their financial expertise will elevate your business to the next level.

A Trusted Numbers-Savvy Advisor

In order to reach your short- and long-term goals, you need to have a strong understanding of your numbers. You’ll need to track the right metrics, run and derive essential information from your reports, and spend time making sure everything is accurate. This can take time, the time you need to actually run your trade business.  

This is where an outsourced CFO will be beneficial, they’re number pros who will get to know your financial condition, analyzes what the numbers say, and present the information to you so you can make the right decisions. 

You’ll be able to focus on your business and personal goals while they manage your finances.

Cons of Outsourcing CFO Services

Less Control

If you like to be hands-on in all aspects of your business, outsourcing CFO services might not be the best option for you. 

An outsourced CFO handles all of the finances so that business owners don’t have to. If your goal is to do more than check in to ensure you’re on track, an outsourced CFO is not for you.

You Could Find an Outsourced CFO that Lacks Experience in Your Industry

Trade businesses are unique. Cash flow demands look different, job costing is among one of the many essential and unique metrics to track, and compensating employees can be far more complicated – just to name a few financial tasks specific to the trade industry.

For these reasons, it’s essential you find an outsourced CFO that specializes in trades. They can set you up with the right tech stack, ensure you’re tracking the right metrics, and craft goals and strategies that are specific to your industry. 

If you don’t work with an industry-specific outsourced CFO, you won’t be leveraging your finances to their full potential. 

There Can Be a Disconnect

An outsourced CFO needs to understand you and your business. Communication is key, without it, your business could suffer. 

When you work with an outsourced CFO it’s a two-way street. Your decision-making has to be complementary to their high-level financial analysis, and vice versa. 

If communication isn’t where it needs to be, it can prevent your business from reaching its goals.

Outsourcing CFO Services is Easy with Argento CPA

An outsourced CFO can be the best thing that ever happens to your business or just another challenge to overcome. Argento CPA specializes in trade businesses, like electrical, plumbing, and HVAC, and understands the needs of its clients. 

We will work with you to avoid industry-specific issues and help you discover and set the right goals. 

We act as a partner to your business, ensuring your numbers are handled and you are confident in where your business stands financially. If you are interested in adding Argento CPA as a trusted member of your team, visit our website to learn more about our outsourced CFO services and business coaching!

Running a trade business can be hectic, but accounting technology makes it easier. 

It removes the need for manual entry, cutting out the tedious tasks that take away from the time you need to manage your business. 

Accounting technology also gives you the ability to see exactly where you stand in all areas of your business including:

• The strength of your cash flow
• Total job costing
• Profitability through a profitability analysis
• The current state of each of your projects
• And more

With the right third-party applications, you can build a tech stack that works together to manage your finances and provide you with all of the accurate details you need to grow your trade business. 

Accounting Technology Stacks Organize Automation

The idea behind a tech stack is to automate as much of your accounting system as possible while ensuring each tool integrates with the others. This streamlines information and limits the need for manual work. 

Currently, there are tools to eliminate nearly every corner of your accounting system, including:

• Job costings
• Bill collecting
• Internal communication
• Centralizing receipts and invoices
• Payment processing
• Bookkeeping
• Project management
• Profitability analysis
• Creating bids and change orders
• Financial forecasting
• Business planning
• Payroll management

As previously mentioned, what’s most important is that all of these tools work together. If not, you’ll have to transfer information from tool to tool, making it more of a hassle and time-consuming process than expected.

The Benefits of a Well-Built Accounting Technology Stack

When utilizing a tech stack that’s working properly together, you’ll see a number of key benefits:

• Work from anywhere. There’s no limit to accessing information in the cloud through this type of technology setup.
• Save time. Put more time toward tasks you need to personally handle since there’s no manual data entry needed.
• Ensure accurate data input since the human factor is eliminated (everyone makes mistakes sometimes!)
• Easy reporting and viewing of data. At any time, you can see who owes you money, what you owe suppliers and other critical information needed for balancing cash flow, forecasting, and planning within your company.

Argento CPA’s Ideal Accounting Technology Stack

Here’s what we believe makes the perfect tech stack for trade businesses:

Knowify

Start here. Everything else you do integrates into Knowify (or QuickBooks which also integrates with Knowify). 

It’s built for the trade industry, which means every component is valuable. More so, it’s easy to use with a streamlined dashboard. 

The job costing feature is one of its most useful tools. It lets you see how you are doing financially on every project at any time. It also includes project management, invoicing software, and a CRM built specifically for trade businesses.

QuickBooks Online

QuickBooks and Knowify bi-directionally sync, which is incredibly important in a tech stack for trade businesses. It allows for the auto-tracking of your expenses and your income. 

QuickBooks syncs all of your accounts automatically, organizes your transactions, and allows you to see valuable reports in real-time. It’s a fundamental tool in an automated accounting system.

Wagepoint

Wagepoint is important for Canadian businesses. It knows Canadian payroll rules for each province and does an excellent job of automating tax and source deductions. 

With Wagepoint, you can: 

• Track your employees’ sick pay and vacation days
• File ROEs electronically
• Track your employees’ benefits
• Set up direct deposit
• Automatically pay for taxes on the day they are done
• And more.

Dext

Instead of manually entering them, Dext allows you to capture your receipts quickly and easily. It pulls all of their necessary data and logs it into your system. Then, it saves your data and sorts it based on what you need and don’t need. Dext also integrates with Knowify.

Stripe

If you don’t already have an account, Stripe is one of the best tools available for accepting and sending payments. It works well with Knowify and is competitive in terms of features and pricing.

Plooto

One of the best accounting components to your tech stack is this. Plooto automates the entire accounts receivable and payable for your business. It pulls the information directly from QuickBooks. 

Plooto helps you make payments, match those payments to invoices, and then mark them as paid. You can also see your accounts payable owning each day as it provides live updates. Plooto also creates an audit trail to streamline record keeping.

Everything Connects with Accounting Technology

Each of these tools is necessary when relying on a solid tech stack to run your accounting system. 

One of the greatest benefits of this particular tech stack is that they each work together without redundancy. This ensures you have everything you need, all in one place.

Ready to Build the Ideal Accounting Technology Stack for Your Trade Business?

If you are ready to grow your trade business, you need a comprehensive tech stack to manage your accounting. With this insight, you can make better decisions and automate many of the tasks you have to do daily. The right tech stack is critical to streamlining processes, saving time, and improving efficiency.Let Argento help you put together a tech stack that drives growth. Contact us today to learn more!