Archive of ‘Small Business’ category

Take Control of Your Finances: Trimming

| Budget, Finances, Personal, Small Business, Tutorial


You’ve tracked. You’ve targeted. And now?

Now you get to Trim.  

Now that you know where your money goes and what your goals are, you have a better sense of where you can “trim” your spending to achieve those goals.

Ready? Let’s get started.

How to Trim Your Finances

Start by reviewing your tracking work. You may have some surprises from when you initially categorized all of your spending habits…. like discovering you spend way too much on transportation when you thought you were spending too much on eating out.

Now it’s time to start trimming.

Note your biggest overruns. Are they shopping, food, entertainment?

Look carefully at these categories. Where can you cut back?

For example, do you need your cigarettes or daily Pepsi?

The easiest way to start trimming is to replace your bad habits. I know, easier said than done, but it works. If you need help with this, I recommend starting with this article from James Clear.

The most recent thing I started to trim was the amount of junk food I bought. I found that just buying junk food on Fridays, as a treat, saved 300 dollars a month!

If you have a debt repayment goal, here’s where you can start making dents. Shift your spending from one of your categories (and bad habits) into your debt.

You can also look at other areas to trim your expenses so you can put as much money toward spending down your debt.

I know it’s tough, but you can do this.

Here are some tools to help you with your trimming.

Create a balanced budget

Start by creating a balanced “budget.” This budget worksheet from Gail Vaz-Oxlade called Gail’s Interactive Budget Worksheet is a great tool to help keep you on track from month to month and help you not go over in certain categories.

Use the Debt Repayment Worksheet

Another tool to help you redirect your money towards your debt and savings goals is the Debt Repayment Worksheet. This worksheet is another one from Gail Vaz-Oxlade and will help you “snowball” your debt and use it to pay down each of your subsequent debts faster. 

You can also use this Savings Calculator from Tangerine to help see how much you need to save each month to reach your goals.

Make it a Habit

No matter what your targeting goals are, frequently look back on your tracking and continue to trim any overruns you have in your spending. Shift your spending towards paying down your debt or towards your financial goals.

You’ll need to review and reevaluate every month to keep on track.

Being financially “fit” is a lifelong skill, and you need to have constant vigilance to stay on top of your money.  But now that you have the tools, you’re ready to tackle your money goals each and every month.

In the next post, we’ll go over how training will help keep you on track with your finances. So stay tuned and come ready to hit the financial gym. 🙂

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Take Control of Your Finances: Targeting

| Budget, Finances, Personal, Small Business, Tutorial


So you’ve done all the tedious work of tracking your finances to see where your money has been going. Enlightening, yeah?

It’s time for the next step in taking control of your finances: Targeting.

While we complete this step, continue to follow your spending by adding any new expenditures to your spreadsheet or paper. You won’t need to refer to your tracking work for the targeting task so you can mostly set it aside for now.

Just don’t forget to keep adding anything new. It’s an ongoing habit that will continue to benefit you.


Targeting is a form of financial goal setting. It’s a way to identify your financial goals, write them down, and set a loose plan on how to achieve them.

So what are your financial goals?

Do you want to help pay for your children’s college education? Do you want to own a home? Will you need to care for aging parents down the road? What about giving money to your church or other charities? Do you want to take a big trip with the family?

Those have all been financial goals of mine, and they tend to be common ones.


Now here’s the hard part.

Take a pen and paper and write down each financial goal you have.

Write down the goal, how much money you’ll need to reach it, and a specific date you want to reach your target.

For example:

Goal – Own a house
Amount needed – $150,000
By – January 2020

Do this for each financial goal you have.

It’s important to write each one down, including a number, and the date you want to achieve it by because once you have it written down, it becomes more real.

If you don’t write it down, it’s a dream, not a goal.

Once it becomes a goal, you can start to think about a plan of attack because without a plan; you’ll never achieve your dreams.


Another area to target during this step is your debt. Just like with your financial goals, write down each debt, who you owe, the total amount, and when you want to have it paid off.

For example:

Debt – Personal Credit Card
Amount – $1256.32
By – December 2017

Next Steps

It can be scary to see all these numbers laid out in front of you, but it’s even scarier to choose not to do something and hope you get what you want.

Now you can see what’s important to you and to give it the weight it deserves.

Having your goals and debts written out also gives you the leeway to sort and prioritize them.

Think about what you want to tackle first. Is it saving for a house or giving to charity?

While each of your financial goals is important, you may not be able to achieve everything at once. That goes for debt repayment as well.

Right now one of my biggest financial goals is to save $45,000 dollars, which I’ve calculated to reach in 3 years, so that I can pursue traveling full-time with my family. Big goal, right? But now that I have one, I can get super clear on the plan to achieve it. 

Next time, we’ll have very specific steps on how to tackle your debt.

We’ll dive into how to trim your money to help make your financial goals that you wrote down today. You’ll learn how you can repay your debt and continue to take control of your money.

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Take Control of Your Finances: Tracking

| Budget, Finances, Small Business, Tutorial

Last time, we talked about the four steps to taking control of your finances. And today, we’re going to start down the path to financial control with Tracking.

Here’s what to do first. Gather up the last six months of your bank, credit card, and any other financial statements.

Why? Because it’s the best way to track where your money goes.

You’ll see the most results with your money if you have an understanding of your spend behavior and choices. Without it, you won’t be able to take control of your finances and make informed decisions around money. Like, you’ll just keep buying all those candles you know you don’t need and kick yourself about because you’re still in debt. Or those shoes. You get what I’m saying.

Overspending is a very real and tricky thing, and I want you to have control over it instead of it controlling you.

Once you have the last six months of your statements, we can get going.

The good news (and the bad news) is that Tracking is the most challenging part of the four steps to financial control.

That’s because sorting through six months of financial statements takes… a while, but trust me when I tell you that it will be worth it in the end.

Start with your bank statements, then follow those with your credit card statements, and end with any other transactions and miscellaneous financial statements.

Don’t forget about any ATM withdrawals. You may have to think carefully about what you spent your cash on, especially if you no longer have the receipts. It’s alright to estimate your cash purchases as long as you’re accounting for all your money.

As you look over each statement, break down your transactions into these categories modified from Gail Vaz-Oxlade:

  • Housing. Anything that has to do with your house will go here, mortgage payments, or rent and any maintenance or insurance.
  • Utilities. Electricity, cell phone bill, cable, and any other type of utility bill goes here.
  • Food. Everything you buy that’s food related. Your daily trip to the coffee shop should definitely go here.
  • Shopping. Anything and everything you buy that isn’t food.  
  • Transportation. Car payment, air travel, taxis, or bus money goes here.
  • Entertainment. Sporting events, concerts, movie tickets, and the aquarium all count.
  • Bank fees. Service charges and ATM withdrawal fees would fall here.
  • Debt payback. All student loan payments, credit card payments, and any other loan payments go here.
  • Savings. Any money that you put towards your savings should go here.

You may want to do this with a spreadsheet so you can quickly add up the columns. Some banks may even have the option to download your statements so you can easily transfer the information into your spreadsheet. But if you don’t want to do it that way, a large pad of paper and pen will do just fine.

Sorting your transactions will take the most amount of time. So go slow. You may want to set aside 30 to 45 minutes a night to complete the task, so you don’t get overwhelmed.

Choose a category for each transaction. When you’re done, add up each of the categories.

Look at those end totals. Are there any surprises?

More often than not, you may be shocked by where your money is going each month. And that’s ok because now you know.

When I suggested this to a friend of mine, she was surprised to see how much she had been spending on coffee alone, which is a common story.

Overall, this knowledge will help you get a handle on your finances and help you move forward with your money instead of backwards and in more debt.

In the next post, we’ll dive into how to target your money and help you make financial goals. I’ll offer lots of advice and tools that will help you take control of your money. So stay tuned next time and come ready to Target. (That’s the next step. It’s not an invitation to go to Target. 🙂 )

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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 (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.

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


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
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.


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: 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. 

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