Introduction: How to Take Control of Your Finances

| Budget, Finances, Personal

Introduction: How to Take Control of Your Finances

Does this sound like you? Do you have a hard time sticking to a budget? Does saving for your goals seem impossible? Do you pile up receipts and bank statements not knowing where your money went?

If so, it’s time to take control of your money and finances.

In this next series of blog posts, we’ll explore what is needed to get a handle on your finances and how to make sense of saving and budgeting. We’ll also explore how you can get to real financial prosperity and what it means to you.

Four Steps to Financial Prosperity

Did you know there are four steps to financial prosperity? They are:

  • Tracking
  • Targeting
  • Trimming
  • Training

All t’s! I did that on purpose. 🙂

We’ll explore each one on the way to helping you gain financial control all with the help of Canadian financial advisor Gail Vaz-Oxlade.

Gail Vaz-Oxlade, of Til Debt Do Us Part, Princess, not only has a series of TV shows, she has a plethora of books and a financial plan designed to help you with your finances. She’s made it fun to track and spend money by developing a series of steps to take and points you can earn to help you achieve financial success.

We’ll partly follow along with her approach outlined in My Money, My Choices to assist us on our financial journey. This is a great place to start, especially if you’re not ready to hire a financial planner. (But when you are, you can contact me.)

To begin, we’ll track six months of spending. I know that sounds like a loooong time but stick with me.

By doing this, you’ll get a clear picture of where your money goes each and every month. If you don’t want to wait that long, it’s just as useful to review your past six month’s worth of banks statements.

By examining the past six months of statements, we’ll calculate what you spend, and you’ll have a better idea of where your money goes and how much you have left each and every month.

This is a major step in figuring out a budget. But we’re not going to use that word.

Don’t call it a budget

The word budget has a negative connotation, especially if you’re already worried about money and unsure of how to get yourself on the right track. So we’re going to banish it from our vocabulary.

In the next blog post, we’ll dive into how to track your money and how best to review it to make sense of where you can target and then trim.

Excited? Me too. We’ll have lots of advice and tools to use that will help you take control of your money.

So stay tuned next time and come ready with six months of your financial statements.

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{Small Business Tutorial} How to Set Up Tax Rates in Xero

| Small Business, Taxes, Tutorial

{Small Business Tutorial}: How to Set Up Tax Rates in Xero

 

 

 

 

 

 

 

 

 

 

Xero is a fantastic cloud-based accounting software for small businesses, but if you’re not an accountant or a bookkeeper, it can get confusing really fast.

And if you really want to be able to use it to benefit your business, you’ll want to make sure it’s set up correctly. That way, your sales are accurately recording and you’re not overpaying at the end of the year in taxes.

One of the things I see small business owners struggle with when they’re managing their books DIY is setting up their tax rates in Xero.

This is something you MUST do before report your good and services tax (GST) and your harmonized sales tax (HST). Luckily, it only takes six steps to get it set up correctly. After that, we’ll go through how to fill out the government form for GST and HST step-by-step.

How to Set a Default Tax Rate

Before reporting GST/HST,  you must first set up your tax rates in Xero.

1) From the Dashboard, go to General Settings

2) In General Settings, click on Tax Rates

3) Click on New Tax Rate

4) A popup will appear where you can enter your tax rate. In this example, I’ve written GST 5% which is Canada’s Goods and Services Tax at 5%. Click Save.

TIP: If your business is in the US, you can enter your State and Federal taxes the same way.

5) What I like to do for myself is create separate tax rates for my purchases and sales. It will help when you look at reports. Stay tuned!

How to Look at a Sales Tax Report

6) From the Dashboard again, let’s take a look at the Sales Tax Report!

7) Here’s a Sales Tax Report for US and Canadian companies. The numbers on the far right are the ones that will go on the Sales Tax report (Canada).

Positive numbers are the tax attributed to sales. Negative numbers are tax attributed to purchases.  To lessen the confusion, I entered the tax rate for purchases and sales separately, so you can see them more clearly on the report.

How to Fill Out the Government Form

Click here to view the government form. It may be different for your province or territory. If you’re in a different country, like New Zealand or the US, I recommend consulting your accountant about this form.

1) Find out your total sales for the period. In this example, it would be Jan 1, 2017 to March 31, 2017. That number goes on line 101. You can find your total sales in the Profit & Loss Report

2) From the sales tax report, tally up all the GST/HST collected from Sales.  In this example, $73.06.  Enter that on line 103.

3) Enter any adjustments to tax on line 104.

4) Add lines 103 and 104.

5) From the sales tax report, tally up all the GST/HST from purchases (amounts in brackets). In this example, $14.02. Enter that on line 106.

6) Enter any adjustments to tax on line 107.

7) Add lines 106 and 107.

8) Subtract line 108 from line 105. $73.06-$14.02 = $59.04

9) If you have other credits applicable, enter them on lines 110 and 110. Add those amounts and enter it on line 112.

10) Subtract line 112 from line 109. Enter on line 113A. In this example, $59.04

11) If you have other debit applicable, enter them on line 205 and 405. Add them together and enter on line 113B.

12) Add lines 113A and 113B. In this example, $59.04.

13) For lines 114 and 115, if your amount is positive, like in my example, you owe the government $59.04. If it were negative, then you would be owed the balance. To have a balance owing to you, you would need to have more input tax credits, tax attributed to purchases for your business, that is greater than the amount you collected for your sales.  

So now you know how to set up the tax rates and how to fill out the form, but you may be wondering what kind of purchases you can claim for your business. If that’s where you’re at, enter your email address below and you’ll get access to an exclusive tax guide where I highlight common (and some little-known) deductions for lowering your tax bill at the end of the year. You’ll also get access to a worksheet for figuring out what to pay yourself.



 

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Why You Need to Know the Difference Between Sales Tax & Income Tax

| Business, Business Basics, Small Business, Taxes

Why You Need to Know the Difference Between Sales Tax and Income Tax

As tax season approaches, I bet your list of questions has been growing. How much am I going to owe the government? What deductions can I take advantage of? WHY IS THERE SO MUCH TO DO?

I hear you. But let’s take it back a few steps because there are some things to know when it comes to taxes.

First, there are two major kinds to know about: sales and income. What are the differences between them, and why do you have to know them?

Before I jump into the nitty-gritty of what they are, knowing the difference between these two can help you make much better decisions for your business. That way, you charge enough for your products and services and you’re not surprised when tax time rolls around, forcing you to charge your credit cards to cover what you haven’t saved.

For the most part, this advice applies to Canada, but there are some resources for the United States. Okay, enough chatter. Let’s talk taxes.

What to Know About Sales Tax

Sales tax is the tax associated with goods and services.

For example, tax added to groceries, all of your candles and jewelry from online shops like Etsy and Ebay, or services like getting the plumbing fixed. We pay extra for almost every purchase we make every day.

For most people, that’s where it ends.

However, once you begin a business, you’re also responsible for charging Sales tax and giving it back to the government. That’s why I mentioned in the post about how much to pay yourself that not all the money you receive in business is your money.

If you make over $30,000/year in Canada, then you must charge %5 GST (goods & services tax).  

Depending on your province, either PST (provincial sales tax) or HST (harmonized sales tax). I know, lots of acronyms. Stick with me here.

I live in Quebec, so I charge %5 GST and %9.975 PST.

You can check if your province has harmonized sales rates by clicking here.

If you live in the United States, check out this resource from the Tax Foundation.

What about digital products?

Because the number of people doing business online is expanding so quickly, many countries around the world are still catching up and haven’t created tax laws for digital goods yet.

If you sell digital products in Canada, then digital products are subject to tax and follow the same rules as if you were selling a tangible product. You can learn more about that here.

In the US, it depends on your state. For example, a state like Nevada considers digital goods tax-exempt while a state like Colorado considers the products taxable. Take a look at this list to check your state.

What to Know About Income Tax

Income tax is based on your total gross sales for the year, which are the sales before your expenses.

We pay those at the end of the year, and they’re determined by percentages set out by the government. Find your tax rate by clicking here.

In an employee situation, those income taxes are deducted right off your paycheck. You don’t really have to worry about it.

In your business, though, you are once again responsible for paying those taxes. (II know, it’s the price we pay for being able to work in pajamas and eat out of the Nutella jar whenever we feel like it.)

If you don’t pay it, the government will start charging you interest the day after taxes are due (April 30). That’s not a situation you want to find yourself in, so plan ahead.

If you operate a business in Canada, you can estimate how much taxes you will be owed here: Simple Tax Calculator

If you operate a business in the US, you can use this calculator: Self-Employment Tax Calculator

Now, here’s the most important piece of advice I can give you in this article.

Once you have an estimate, start saving portions of your income every month. That way you’ll be prepared at tax time. I recommend opening a separate bank account just for taxes. You can read more about that here: 3 Must-Have Financial Pieces to Run Your Online Business

If you want ideas on how to reduce your tax owing, check out the tax guide by signing up for the free bookkeeping resources library.

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How Much Should You Pay Yourself?

| Business, Business Basics, Small Business, Tutorial

How Much Should You Pay Yourself?

How much should you pay yourself?

So many entrepreneurs falter here and end up paying themselves less thinking that it’s better for the business or that they’re being greedy by taking too much.

The truth is that too many entrepreneurs are underpaying themselves. Here’s what I mean. If you’re paying yourself $2,000 a month and you really should be paying yourself $3000, you’re missing out on $12,000 a year. That’s a couple family vacations or a significant amount of savings!

Business owners are way over-complicating this. Here’s how you can think about this.

Paying yourself is not all that different from getting paid by an employer. When you get your paycheck, you distribute your income between bills, food, fun, and savings if there’s anything left over.

The main difference when you own a business? You have to pay your own taxes.

I know it’s tough to part with your hard-earned cash, so the first mindset shift I want you to take is that not all of your hard-earned cash belongs to you.

I know, I know. I don’t like it either. I’m only here to help guide you along.

Formula: How to Pay Yourself

To make this easy, I have a formula you can use to figure out how much to pay yourself. (If you want, you can download the worksheet I have for free here in my resource library.)

Take this example: You’re making $10,000 per month (congrats!).

In Canada, that means your marginal tax rate is %26. (You can reference this list for tax rates in America.) So, I would distribute income like this:

  • %1 profit – $100
  • %23 expenses – $2300
  • %26 tax – $2600
  • %50 payroll – $5000

To keep things organized, each of the lines above should have their own bank accounts. My favorite is Tangerine.ca. (If you open an account before April 30, 2017 with a minimum of $100, you’ll earn $50. Just use my Orange Key {16898465S1}. Yay for free money!)

Why did I write 1% towards profit?

Mike Michalowicz, author of the book Profit First, explains this best. He says, and I’m paraphrasing, that we’ve learned to pay ourselves first — before bills — so we can relate that lesson to the profit we earn in our businesses.

He says that most businesses don’t make a profit, but this percentage system ensure one because you’re taking your profit out before paying bills and payroll. By following this system, you always have a profit at the end of the year, which you’ll clearly see when you close your books.

While 50% towards payroll may seem very generous, it’s reasonable if you compare it to an average wage of middle-income earners in the US.

Then you’re looking at between 2,000 – 3,000 take home pay each month. If you have contractors. you’ll be looking at another 1,000 – 2,000 in expenses.

So, like so many things in life, how much you decide to pay yourself is subjective. My biggest piece of advice is to make sure you think about taxes all year long, instead of just at the end of the year. I know so many business owners who spend, spend, spend and wonder why they don’t have a profit or enough saved up for taxes.

To sum it all up: First, determine how much you’re spending on expenses (not including subcontractors), find your tax bracket, always put away 1% profit, and work up to take %50 for payroll.

Now, this may take awhile, so be patient with yourself. Learning how to manage your money as a business owner is definitely a journey, but you wouldn’t be here reading this if you weren’t up to the challenge. 🙂

Click here to get free access to my library of financial resources so you can download the worksheet that will help you figure out how much to pay yourself, too.

Have questions about a more specific case or business? Let me know in the comments below.

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How to Close Your Books: “Zero” Temporary Accounts

| Bookkeeping, Small Business

How to Close Your Books: “Zero” Temporary Accounts
In our final part of the How to Close Your Books series, you’ll learn how to “zero” temporary accounts. What are those? Temporary accounts include expenses, contra-expenses, gains, revenue, contra-revenue, and losses. (“Contra” means opposite, so for example, a contra-revenue account would include Refunds and Discounts.) These accounts get set back to zero for the new year.

This way, reports prepared will only have data for the current year. The amounts are totaled together and are either debited or credited to the Owner’s Equity account. Below, you’ll see an example. We’ll close out the expense accounts and sales accounts using the numbers from your trial balance.

TRIAL BALANCE
Account Debit Credit
Bank Checking 1000
Paypal 2050
Accounts Receivable 0
Advertising 520
Delivery 1580
Insurance 6540
Purchases 8740
Telephone 520
Rent 12000
Utilities 6580
Other Expense 0
Credit Card 65214
Accounts Payable 0
Sales Tax 37500
Sales 250413
Owner Investment 0
Owner Withdrawals 0
Owner’s Equity 0

1) Add amount of expenses

Add up the amounts in the expenses account, and mark it in the debit column.

2) Add amount of sales

3) Subtract

Add up the amounts in the sales account, and mark it in the credit column.

Subtract the smaller number from the big number. If there is more credit, then that is positive Net Income, whereas if there were more debit, that is a Net Loss. Whatever the case, the debit goes to the debit column for Owner’s Equity and the credit goes to the credit column of Owners Equity.

Total Debit Credit
 Step 1 36480
Step 2 250413
Step 3   213933

 

Adjusted TRIAL BALANCE
Account Debit Credit
Bank Checking 1000
Paypal 2050
Accounts Receivable 0
Advertising 0
Delivery 0
Insurance 0
Purchases 0
Telephone 0
Rent 0
Utilities 0
Other Expense 0
Credit Card 65214
Accounts Payable 0
Sales Tax 37500
Sales
Owner Investment 0
Owner Withdrawals 0
Owner’s Equity 213933


How do you do that online?

Lucky for us Xero and Wave do this automatically! This step is completely internal and if you don’t believe me, go check out a Balance Sheet report for Dec 31, 201X and compare the report for Jan 1, 201X and you should notice that the Owner’s Equity account has changed and all temporary accounts, like expenses and sales, are now ZERO.

You have now successfully closed out your accounts!

Congratulations. This means you’re ready to start the new year off right. You now know how to track your expenses and invoices and perhaps do them at least once a month to keep on top of them. But even if you leave it until the end of the year, you now know what you need to do to close out your books for the year. Thank you for following along!

If you want to get the full guide on How to Close Your Books for the year in one handy PDF, sign up below.



 

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How to Close Your Books: Trial Balances

| Bookkeeping, Business, Finances, Small Business, Tutorial

How to Close Your Books: Trial Balances

In this next post in the How to Close Your Books Series, we’re going to make sure all of your accounts balance. Once you know that, you can prepare your taxes or send the files to an accountant who can prepare your taxes for you.

Before we start, make sure all of your expenses and invoices are entered. See the corresponding tutorials and do that work before moving ahead. You’ll then need to have all of the bank reconciliations done and ensure that any missing transactions are added. Once you have all that complete, you can start your trial balance as you’ll need to reference the master spreadsheet to get these numbers.

Write down all the accounts in order

Write down all the accounts in order of

1) Assets

2) Expenses

3) Liabilities

4) Revenues

5) Equity

You’ll do this for each of your accounts (bank checking, PayPal, etc.), and it can be alphabetical if needed. Usually, these accounts are assigned numbers in accounting software. For example, Assets will have 1000-1999, Liabilities 2000-2999, Equity 3000-3999, Revenues 4000-4999, Expenses 6000-6999. You may want to implement a similar numbering system for your spreadsheet as it makes it easier to find an account if a new bookkeeper is looking things over.

What are assets, expenses, liabilities, revenues, and equity?

Assets are things of value that are owned by your company. For example, cash accounts, accounts receivables, any land, equipment, or inventory. Your expenses are the costs associated with doing business such as advertising, materials, fees, etc. Your liabilities are obligations to pay later. For example, credit cards, any bank loans, or personal loans.

Revenues are any fees earned from providing services and the amounts of merchandise sold. An example of this are sales of products or consulting/coaching revenue. Equity is the amount of ownership or profit in a company. For example, the owner’s equity in a Sole Proprietorship refers to the amount of profit at year end.

You should have these numbers from your totals throughout the year, as you’ve gone through and added your expenses, invoices and then reconciled your bank accounts. Take the totals of each account from the spreadsheet and add them in the proper column like in the example below, with debits on the left and credits on the right.

There is a rule of thumb, if every account is positive, then the balances will go in the respective debit or credit column. Assets and Expenses are in normal/positive DEBIT balance and Revenues, Liabilities and Equity are in normal/positive CREDIT Balance.

To make it easy, I have the spreadsheet calculate account Totals per month, per account, and then a Grand Total for the Year.


Want the tutorial of how to close your books in one easy-to-use PDF with free spreadsheet templates? Click here to access my Bookkeeping Resources library to get the entire How to Close Your Books series as a PDF.


Example:

TRIAL BALANCE
Account Debit Credit
Bank Checking 0.0
Paypal 0.0
Accounts Receivable 0.0
Advertising 0.0
Delivery 0.0
Insurance 0.0
Purchases 0.0
Telephone 0.0
Rent 0.0
Utilities 0.0
Other Expense 0.0
Credit Card 0.0
Accounts Payable 0.0
Sales Tax 0.0
Sales 0.0
Owner Investment 0.0
Owner Withdrawals 0.0
Owner’s Equity 0.0

 

For online accounting software Once you have this done, you’ll use these numbers for your taxes, and if necessary, a Balance Sheet and Income Statement.

Trial Balances are all done automatically. Software is set up for double entry bookkeeping and makes the user enter amounts only once unless there is a manual journey but even then the system won’t let you save it until your Debits equal Credits.

For Xero

Go to Reports >> All Reports >> Detailed Reports >> click on Trial Balance. You can publish the report, which means that the report is saved with those particular numbers and can be printed or exported.

For Wave

Go to Reports >> Trial Balance. You can also export this to Excel, CSV or PDF.


If you want to get the full guide on How to Close Your Books for the year in one handy PDF, sign up below.

 

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How to Close Your Books: Invoices

| Bookkeeping

invoices_coverContinuing along with our series on closing your books to get your business finances in order for the new year, today we’re going to talk about invoices. Let’s dive right in.

When you take in money as a business, you may not necessarily record the transaction as an invoice, but it’s helpful to think about it that way.

Whenever you receive money, you need to record it. Even if you don’t have an accounting program or software, you need to mark it down and have some type of receipt of payment.

For example, if you use a Square reader, it sends a receipt of payment and captures the information about that sale. And while you have this information within Square, you still need to organize and document every last penny you have received throughout the year.

Step 1: Gather your invoices

This includes any time you receive income throughout the year. Again, start at the beginning of the year, and take it one month at a time.

Step 2: Set up your spreadsheet

Since you may not have an accounting program or software set up, I’m going to show you how to do this manually within an Excel spreadsheet.

Using the same spreadsheet I introduced in the Expenses post, fill in the fields under the Income columns.

To get access to the spreadsheet template, click here to access the free Bookkeeping Resources library.

Step 3: Enter your invoices

Starting with your first sale from the year, enter the information needed to the columns of the spreadsheet.

  • Date – Enter the date of the sale when the purchase occurred.
  • Description – Enter what you sold.
  • Reference – Enter your own invoice number here. If you haven’t numbered your orders or sales, you can start by saying your first sale of the year is 001 and continue on down the line. You want to do this with all of your orders whether they’re from Etsy, Big Cartel, so on and so forth.
  • Bank Account, Debit or Credit – Record the debit to your bank account or a credit to your account if you’ve sent an invoice but have not been paid for that invoice yet.
  • Sales – You may want to split this column up for the different sources of income. E.g.  Etsy sales, consulting sales, BigCartel or in person, craft fair sales. This can help you see where your most volume of sales are from and where the most money is made. This is great information to have for tracking purposes and to help grow your business.
  • Tax – Did you charge tax and how much did you collect?
    • In Canada, you should be collecting GST if you have over 30,000 gross revenue.
    • In the U.S., you should be collecting Sales tax in the state you are located when doing in-person sales. Online you only need to collect sales tax if you sell to a person who resides in a state where you have a physical location.

Once you’ve filled out these columns for your first invoice, you need to repeat the process for all of your income from the fiscal year until all of your invoices are accounted for. Everything from the year goes into the same spreadsheet.

Take it slow, and go one month at a time.

But what about online systems? How do you enter your invoices?

The good news is, if you want to set up an accounting system or start using accounting software, you can still do so. You may have started this last week with your expenses, so you should be able to piggyback off of what you’ve already entered and continue by entering your invoices.

For an online system like Xero:

Xero has an invoice template which makes it easy to import all of those sales you wrote up in a spreadsheet. It’s a little more work because each invoice needs to be matched with a payment and then reconciled with the corresponding bank transaction. You can make invoices for cash sales and match the payments to your petty cash account.

For an online system like Wave:

Unfortunately, you can only create invoices within Wave and not import them from a spreadsheet. Once made, you can match a transaction to the invoice with the “create invoice payment” function.

For an online system like Freshbooks:

Another easy to use software is Freshbooks, but it’s something to set up for next year. Freshbooks is great for businesses who don’t want a fully functional accounting system but who need to get paid easily. A neat feature of Freshbooks is the capability to send recurring payments. Set up a profile, and see the money come in automatically!

Once all your invoices are in for the year, congratulate yourself on a job well done. You’re almost done closing out your books for the year!

In the next step, I go over how to reconcile your accounts.

If you want to get the full guide on How to Close Your Books for the year in one handy PDF, sign up below.



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How to Close Your Books: Expenses

| Bookkeeping, Business, Finances, Small Business, Tutorial

How to Close Your Books: Expenses

In the introduction of how to close your books, I talked about the importance of closing out and reconciling your business accounts for the start of the new fiscal year and why you need to do so.

In this post, I’ll be discussing step by step how to document your expenses from the current fiscal year and how to prepare them for the end of year wrap up. Let’s get started.

Step 1: Gather your expenses

Gather your expenses from this current fiscal year. We’ll be starting at the beginning of the year with your expenses from January.

Step 2: Set up your spreadsheet

Since not everyone has accounting software or perhaps has not kept up to date with their software throughout the year, I’m going to show you how to do this by hand, or at least in an Excel spreadsheet.

Create a new spreadsheet and include the following columns:

Date | Description | Reference | Source | Bank Account Dr, Cr | Category | GST Paid (or Sales Tax Paid)

I’ve made a sample spreadsheet for you to use and customize for your expenses, which you can access for free by signing up to the Bookkeeping Resources library and downloading the full How to Close Your Books PDF.

Step 3: Enter your expenses

Take a receipt and fill in the columns with the information from the receipt, fill out all the columns:

  • Date – Enter the date of the receipt when the purchase occurred.
  • Description – Enter the name of the company you purchased from. For example, if you purchased Facebook ads, you’ll record it as “Facebook.”
  • Reference – Here you want to record a purchase order number or invoice number that the receipt references. If you don’t have one, it’s ok to leave this field blank.
  • Source –  For this field, record where the money came out of. Was it your bank account, checkbook, PayPal, etc?

You should have a reference or a source per expense. You don’t need both, but you do need one or the other.

  • Bank Account, Debit or Credit – Here you want to record the amount of money that was debited from your bank account and/or credited to another account. I explain the different between these two options in my two previous posts What The Heck Is A Debit Anyway? and Credit- Love It Or Hate It
  • Categories – Here you want to record the type of expense. Was it advertising, shipping, bank fees? There are many expense categories to choose from.
  • GST Paid – Here you want to enter the tax you paid on your expense. In Canada, there are two taxes, so you may want to have two columns one for GST and one for Provincial tax. In the U.S., you can record the sales tax you paid on the expense, if any.

Once you’ve filled out these columns for the first expense, you need to repeat the process for all of your receipts from the fiscal year until all of your receipts are accounted for. Everything from the year goes into the same spreadsheet. Take it slow and go one month at a time.

But what about online systems? How do you enter expenses?

The good news is, if you want to set up an accounting system or start using accounting software, you can still do so.

For an online system like Xero:

Create an account with Receipt Bank and send all of your receipts virtually. Most of our receipts these days come into our email and Receipt Bank allows you to forward your receipts to a unique email just for you. You can even take a picture of your receipt, if you have one from a cash purchase with an app (available on both Apple and Android), and it will send it to your account automatically.

Receipt Bank takes care of scanning the receipt and gets it ready to publish to Xero. Once you’ve checked your receipts for accuracy and they’re set to the right expense account, you can set the program to automatically send receipts to Xero. It will even allow you to export your expenses as an Excel Spreadsheet or to PDF.

For an online system like Wave:

Shoeboxed is another system that takes care of receipts. It will scan your receipts and get them ready for export into Wave. With a click of a few buttons, you can watch all of your receipts turn into transactions inside Wave. It will even allow you to export your expenses as an Excel Spreadsheet, CSV, or PDF.

Once all your expenses are in for the year pat yourself on the back and treat yourself to a glass of wine because that was a lot of work!

And now that you know how to record your expenses, maybe next year you’ll do it year round so you won’t have to do it all in one go.

In part three of how to close your books, I’ll go over how to enter your invoices from the year. So come prepared with at least your first three months of invoices. 

If you want to get the full guide on How to Close Your Books for the year in one handy PDF, sign up below.



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How to Close Your Books: Introduction

| Bookkeeping, Business, Finances, Small Business, Tutorial

How to Close Your Books: Introduction

It’s almost time to ring in the new year but before we pop open the champagne, there’s a lot to do to close out your books for the year. There’s expenses, invoices and bank accounts to reconcile. So hold on to those champagne flutes and party hats. You’ll first need to get yourself organized.

If you start now, you won’t feel rushed or overwhelmed come the ringing in the new year. You’ll even save yourself the headache of scrambling to do the work at tax time.

Remember, tax filings in Canada are due June 15, though you have to pay your dues by April 30th. In the U.S., you’ll need to file by April 15th. And while those filing deadlines may seem like a long ways away, they always come sooner rather than later. I don’t want you to be stressed when they do! 

At the end of the fiscal year, you need to close out the business year to get ready for tax time as well as close out your accounts for the year. Most likely your fiscal year for your business follows the calendar year, so it’s best to start now before the year is over. All of your accounts have to be reconciled. You’ll want to know how much money you made and your expenses for the year. This information will all go into your tax returns, as well.


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You’ll also want to reconcile all of your “temporary” accounts (accounts like Sales, Expenses and Draws) so they are set to zero for the new fiscal year. When you close out and reconcile these accounts, it allows you to compare how much you made and spent during the year. This information is very helpful for year-to-year comparisons, too. It will help show you how financially stable your business is, how much you have to invest back into your business, or how much harder you have to work in the new year to grow your business. When you know this information, putting together a plan to get to that six-figure mark (or over it!) becomes a whole lot more tangible.

Over the next couple of weeks, I’ll show you how to close out your accounts for the year and help you get ready for tax time. I’ll discuss the specifics of expenses, invoices, and reconciliation of your accounts.

To get started, you’ll need to start gathering your expenses and invoices over the past year. You’ll also need to look at your business bank accounts including PayPal, Square, or the like. We’ll take it slow and I’ll show you how to go through one month at a time so you won’t be overwhelmed.

Next week we’ll start looking at your expenses. If you haven’t kept up with your bookkeeping throughout the year, or haven’t started, you’ll be just fine. Don’t fret. I’ll show you how you can get your finances in order. So to be prepared, gather your expenses for the first three months of the year. I’ll explain how to deal with them and get you started on the rest of the year’s expenses.

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