Your Stress-Free Guide to Year End Bookkeeping

“Year end” – what a vague phrase! To non-accountants, it doesn’t mean much beyond planning your new year’s eve party, but for us, it’s a critical concept and activity.

Year end is the time of year where you “wrap up” your financial year, including inventory, revenue, taxes – the whole financial works! Once your year end documentation is complete, accountants will then take these numbers to conduct an audit, review, or simply file your tax return.

How To Ensure Your Year End is Done Correctly

At Legacy Advantage, we have our own way of ensuring an accurate and complete year end. I’m going to share some proprietary information with you, so shhh… keep it a secret. I hope the following checklist takes a bit of stress off your plate and makes your year end process a little easier.

Tax Agency Compliance Review

Every company needs to comply with federal and provincial regulatory bodies. The Canada Revenue Agency (CRA) is a federal tax agency to whom you pay your corporate taxes and your government sales tax (GST) / harmonized sales tax (HST). The Ministry of BC is the BC Provincial tax agency to whom you pay your provincial sales tax (PST).

What to do:

  • Check with the CRA and Ministry of BC to ensure that all GST, PST, payroll remittances have been filed and paid.
  • If you have outstanding amounts, pay them immediately.

Bank Reconciliation Review

The purpose of Bank Reconciliation is to verify if all of your bank transactions have been captured. This is the most fundamental step in ensuring your bookkeeping is accurate.

What to do: 

  • Pull up your bank reconciliation for the last month of your fiscal year.
  • Check if you have any uncleared deposits or payments. If so, are they stale? Are there errors?
  • Any uncleared amounts should be addressed individually. Should they be cleared out or should they remain as uncleared?

Balance Sheet Review

Your Balance Sheet shows you at your company’s Assets & Liabilities are at any point in time. It’s important that this picture is correct before you file your taxes.

What to do:

Many balance sheet accounts need to be reviewed for year end. The following are among the most important:

  • Prepaid Expenses – Are these amounts still prepaid? Or should they be recognized?
  • If you have a sales clearing account (because you have a point of sales system), does it actually clear?
  • Accounts Payable (AP) – Are all AP amounts real? Have these bills already been paid but just not marked off? Cleaning up AP can be quite cumbersome. Reach out to us if you need help.
  • Accounts Receivable (AR) – Are all AR amounts real? Have they already been collected, but just not marked off? Or are they bad debt? Below is a video on how to write off bad debt in Quickbooks Online (QBO).

Profit and Loss Review

Profit and loss statement shows you how much profit… or loss… you have made in the year.

What to do:

  • Let’s assess whether any expenses should be capitalized. Look through your Office Expense and Repair and Maintenance ledger to see if you made any purchases over $500. If so, check if they should be capitalized instead of expensed. For example, if you bought a new Mac for ~$1200, then it should be recorded to “Computer Equipment,” instead of expensed through Office Expenses.
  • Are there any items that look strange? For example, negative sales or positive expenses.
  • Are there any transactions in “uncategorized transactions” or “suspense” or “Ask My Accountant”? Those need to be allocated and cleared up.
  • Lastly, we do a trend analysis. We pull up the profit & loss by month and look for any anomalies. For example, we can check if rent/utilities/payroll amounts have any significant variances from month to month. If so, it might be an indication of error.

Transaction Review

Your bookkeeping is simply an amalgamation of all the transactions you have recorded in the year. It’s important to selectively review these individual transactions to ensure that they are correct.

What to do:

  • For example, at Legacy Advantage, we take a risk-based approach to in-depth review. More specifically, we take a look at all the large transactions to ensure that they are recorded properly.
  • Another area of high risk is journal entries. We review all large journal entries to ensure accuracy.

Client Specific Review

Each client has their own bookkeeping nuances. For example, they want the numbers to be presented a special way, or they want their payroll cost split over a number of different projects. These special requests need to be reviewed.

What to do:

  • Each client has its own nuances. We perform a review according to these nuances. For example, non-profits have deferred revenues and/or funds.

Account Overview

Here’s where we can get a little creative. After all the accounts are accurate, we can look for ways to add value to our clients.

Here are some examples:

  • Do our clients have a hard time tracking Cost of Goods Sold? Then we can recommend POS systems and make introductions to vendors to improve this process.
  • Do our clients have high transaction costs? If so, we can make introductions to Payment Processors to see if they can get a better deal.
  • Do our clients have sales in more than one provinces? Then we need to assess whether there are any sales tax exposures.

At the end of all of this, we can then send these files to your tax accountant for them to file your taxes.

Need assistance correctly reviewing your year end?

You still have time to contact us before your year end documents are due.


How to Register and File a GST Payment

Starting a new business or organization comes with its freedoms – but there are a lot of responsibilities and information that you must learn to be successful. You might have heard that you need to get a GST number and need to make a GST payment.

We outline who needs a GST number, how to register, how to track GST, how to file in Quickbooks, and make a GST payment. No matter where you are on your journey – if you’re just starting or in the middle of reconciling your year end – this article will help you understand and action everything around GST.

What is a GST Number?

First things first: a GST number is a basically your CRA Business Number followed by RT0001. For example, if your business number is 123456789, then your GST number is 123456789RT0001. (Your GST number could end in RT0002, but those are rare cases).

Having a GST number requires you to charge GST on taxable sales. At the same time, it allows you to get a refund on the GST that you pay (in the form of ITC’s).

When To Register For a GST Number

You might be unsure of when you need to register for a GST number and how it will benefit your company or organization. The short answer is that if your organization is working with $30,000 or more per year, then it’s time to register for a GST number.

However, don’t fear registering for a GST number, it comes with some benefits. GST is a smart tax because it allows you to claim GST that you have paid as “Input Tax Credits”. That means you qualify for refunds and can claim some money back.

To learn more, check out a post I wrote about when to register for a GST number.

If your organization is working with $30,000/yr, it’s time to register for a GST number. Click To Tweet

How to Calculate Your GST Payment

You’re probably asking yourself, “how do I track my GST accurately?”.

Fortunately, most accounting programs are robust tax crunching machines. Each entry you make will have a field dedicated to extracting that valuable tax information. I recommend using an accounting software like Quickbooks Online to properly track your GST.

Download Quickbooks’ step-by-step guide to learn exactly how to make GST calculations work for your business.

One point you should be aware of, however, is if you make a journal entry into the GST account. This is because if you use a journal entry, the GST module won’t pick it up. You have to reverse calculate the GST so that the GST is properly accounted.

If you have this problem, contact us at Legacy Advantage and we’ll show you how to do it properly.

How to File (and Pay) your GST

Using an accounting software like Quickbooks Online is a tremendous help for tracking your GST information. Unfortunately, the software doesn’t actually “file” your GST payment for you. Instead, the software simply gives you a print out of all the information that you’ll be to file and pay.

Again, if you ever need help navigating through Quickbooks, I recommend downloading Quickbooks’ guide on filing taxes.

The easiest way to file and pay at the same time is through your online banking.

If you need additional help, contact your banker to set up your GST payment process for you. Make sure to bring along your GST number.

Still need help with your GST payment?

Feel free to contact us with any questions you may have about your GST payment – or any other step of the way. We’re always happy to help.


Issuing Accurate Donation Receipts: Basic Guidelines for Charities and Non-Profits

Charitable organizations and non-profits rely on the donations they receive and the funds they raise to finance their operations, and in return issue donation receipts to their donors for tax purposes. This may sound like a straightforward process, but in reality, the issuing of donation receipts can get pretty complicated. Let’s look at some of the challenges charities face in sorting this out.

Making sure that donation receipts are accurate and official

First and foremost, to be considered official, donation receipts issued by the charity must include every piece of information specified by the Canada Revenue Agency (CRA). Omitting any of these will result in the CRA denying the donation receipt, which means more admin work for the charity and a tax filing headache for the donor.

Common pieces of information that get left off of receipts include the:

  • Legal name of the charity (not the operating name)
  • Charity number
  • Receipt number
  • Location from which the receipt is being issued
  • CRA web address (

A wise precaution for charities and non-profits is to use a receipt template to ensure that all of the necessary information is present. Donors can use the CRA checklist to confirm the accuracy of the receipts they receive in advance before submitting these to the CRA.

A wise precaution for charities and non-profits is to use a receipt template. Click To Tweet

Knowing when to issue donation receipts, and for how much

If the charity receives a direct donation, then the amount written on the donation receipt is equal to the amount that was donated—simple. Other cases are more complex. Consider this scenario. A charity is hosting a gala that includes dinner. To get in, donors must pay $100.

The donation receipt should be made out for $100, right? Wrong. Providing the meal costs the charity $25, so the meal value is actually a benefit to the donor. On the donation receipt, this has to be clearly broken down: the full amount of the ticket ($100), the donor’s advantage ($25), and the difference ($75). Only the difference is claimable by the donor for tax purposes.

Let’s do another example. Let’s say you are a member of a sports club. The make a donation of $100, but it comes with a club membership that gives you access to the facilities. This gym access membership is a benefit to the donor. Let’s assume that the normal cost of going to this gym is $20, then the donation receipt can only be for $80.

Recognizing which donations don’t qualify for receipts

Sometimes charities and non-profits accept “donations” in exchange for providing a product or service (e.g.: facilitating a film screening or some other event, activity, or presentation). In reality, the donation is payment for the product or service provided, and while this is indeed a bit of a gray area, charities and non-profits should not issue donation receipts in these cases.

Here are some other common types of donations that do not qualify for a tax receipt:

  • Donations received as a result of an obligation or inducement
  • Donations of services to a charity (as a contractor)
  • Gift cards and certificates
  • The purchase of goods or services from a charity
  • Donations directed to specific individuals, families, or non-qualified recipient
  • Donations of non-qualifying securities
  • Use of vacation property
  • Lottery or raffle tickets

Assigning a fair market value to non-cash donations

Donation receipts can be issued for donations of shares or assets by assigning a market value to the donation. But how is this value determined? Let’s say a donor transfers marketable securities, like stocks or bonds, to a non-profit. In this case, the non-profit would issue a donation receipt for the fair market value of the securities on the date of the transfer. If the shares go up or down in value the next day, it doesn’t matter.

Now let’s say the donation was an item, like a car or a computer. If the item has a readily available market value (e.g.: a second-hand car worth $3,000), the non-profit would just issue a donation receipt for that amount. It gets more complicated when the value of the non-cash gift is unclear. Say a donor gives a piece of art to the non-profit. To assign a fair value, the non-profit would need to get an expert to independently evaluate the piece’s worth, and then issue a donation receipt based on this valuation.

Do you have donations that you need help sorting out?

Give us a shout today!

If you have a question about what the difference is between a charity, non-profit and a foundation, click here.

How Long Do I Need to Keep My CRA Tax Return?

After you’ve inputted your daily, monthly and year-end tax records, you may think that you’ve completed your bookkeeping work. Unfortunately not. One of the questions I get asked the most is, “How long to keep tax records in Canada?” The answer, sadly, isn’t one or two years. Officially, it’s “six years after the tax year”. Or in other words, it’s best practice to keep your tax records for at least seven years.

Why do I need to keep my CRA tax return for seven years?

The Canada Revenue Agency (CRA), the tax agency in Canada, may request to see your tax return within a seven year period. Depending on the level of engagement, you may be required to produce the original receipts. This will help the CRA determine if you, in fact, do qualify for any deductions you have filed for and if you owe any more taxes.

If you run a business or organization, it is your responsibility to keep these documents and present them upon request. Failing to produce originals to substantiate your CRA tax return can result in the CRA denying your expense claims and charge you interest and penalties.

Did you know? It's best practice to keep your records for at least 7 years! Click To Tweet

What is the best way to store my tax records?

We now live in a time when this is easier than ever to store large amounts of information digitally. Instead of filling a corner of your office with jam-packed banker’s boxes, you can manage them electronically. Keeping tax records in electronic format is a perfectly accepted practice.  

I highly recommend uploading your CRA tax return and other original receipts electronically. Why? Because doing so will:

  • save space, time and money
  • allows for easy retrieval
  • prevent receipts from fading

If you don’t have too many receipts, one option is to take photos of them and upload them to a cloud service, such as Google Drive or Dropbox. Instead of labouring to properly date and file each receipt, any uploaded photos will automatically be date stamped. This will save you countless hours. The simplest way is to organize your stored receipts are by month, with each month having its own folder. If you have lots of receipts, however, it’s best to organize them by vendor.

If you use Quickbooks Online and feel a little adventurous, you can look into HubDoc. You take photos of your receipts on the go with their app. Using OCR technology, HubDoc extracts the vendor information, date, amount, and tax amount. You can then push those transactions into Quickbooks Online. It’s a tremendously powerful tool that’s worth considering for your recordkeeping management.

Remember that at the end of your day, it’s your responsibility to keep your CRA tax return for seven years. It’s not the responsibility of your accountant, bookkeeper, or office manager. It’s yours. Therefore, it’s an important topic to discuss with your financial team and ensure everyone knows whose responsibility it is to keep certain documents.

Remember the adage:

“If everyone’s responsible for it, no one is.”

If you need any help digitizing your recordkeeping, please contact us.


How Does the 80 20 Principle Work in Bookkeeping?

The 80 20 principle is likely a phrase you’ve heard before. But have you ever heard it be applied to bookkeeping practices? Maybe not. For those of you that aren’t familiar with the 80 20 principle, also referred to as the Pareto principle, here’s what Wikipedia has to say about it:

“The 80 20 principle was suggested by management thinker Joseph M. Juran. It was named after the Italian economist Vilfredo Pareto, who observed that 80% of income in Italy was received by 20% of the Italian population. The assumption is that most of the results in any situation are determined by a small number of causes.”

Joseph M. Juran made some apt conclusions about Italy’s income, but what does that have to do with bookkeeping? Turns out, everything!

The 80 20 principle and bookkeeping

Chances are, 20% of your products/jobs/service lines/activities generate 80% of your profits. I want to emphasize that we are talking about profits, and not revenues. Just by looking at the top line, you are missing a wealth of data that will help you make better business decisions. One way to think about this is: Revenue is vanity; profit is sanity; cash is king.

For example, a large revenue job may require extensive resources, thus leading to lower profits than a combination of your small jobs. Similarly, you might have 2000 SKU’s in your inventory. It’s likely that only 20% of those products are generating the majority of your profits.

Unless you track your profits and costs, how would you be able to apply the 80 20 principle to your company?

20% of your activities generate 80% of your profits. Click To Tweet

How bookkeeping figures out the 80 20 principle

Let’s imagine you’re running a project or job based company, like a design firm, painting company, electrical company, where your income and expenses can be directly traced to a job.

All income and expenses will be tracked by project, and at the end of the quarter, we can analyze all the jobs all at once. We’ll sort each job by profitability. Then we look at the top 20% of the most profitable jobs. What do they all have in common? Can we replicate these results? Then, we review the bottom 20% of the least profitable jobs. What do they all have in common? How can we prevent these things from happening again?

Investing in your business’ bookkeeping allows you to get into the details of your company. Do more of the activities that increase margins, and reduce the activities that decrease margins. Quarter over quarter, year of year, the disciplined process of analyzing your project profits will allow you become much more profitable.

How would you like to generate the same amount of business next year, but be way more profitable? Why work harder when you can work smarter!

In Summary:

  • Similar to “Working smarter, not harder,” the 80 20 principle is the idea that 20% of your efforts contribute to 80% of your profits.
  • Understanding your profits vs. costs can help you determine which activities are significantly adding to your profitability.
  • Once you’ve understood how this principle works for your business, then you must rigorously apply those learnings. You need to put this information to work.
  • Detailed bookkeeping services can help unveil this information.

The 80 20 principle is a powerful way to reach your business objectives. Our bookkeeping team will identify the 20% and provide insight into what to do next. Let us help you grow your business, contact us today!

5 Things To Ask Before Choosing Your Bookkeeper

Your business is thriving – and you realize that it’s no longer a good use of your time to be doing all of your bookkeeping on your own. You’re confident that you’ve done a good job establishing your processes, but you’re not getting the comprehensive financial analytics you want. You know there is a better way. You’re looking for help, and more importantly, smart insights that will help your business grow. Another one of your priorities is to reduce your overall stress and have more time to spend with friends and family. You’re on the hunt for a bookkeeper that will help you achieve your business and personal goals.

What if I told you that many bookkeepers only do the bare minimum and actually don’t reduce that much of your workload?

That doesn’t sound great – right?

What if I told you that many bookkeepers only do the bare minimum... Click To Tweet

I’ve created an easy cheat sheet to help you ask the right questions when you’re searching for a bookkeeper that will work for you.

Here’s what I recommend you ask before choosing your bookkeeper:

  1. How can you contribute to my bottom line? Can you bring any innovative solutions to my business that save me money?
  2. What’s your pricing structure? Do you have an hourly rate? Or do you have a performance-based rate?
  3. Do you have a team to back you up? If my associate is ill or goes on vacation, will another one of your team members maintain my books?
  4. What responsibilities do I (the business owner) have in the bookkeeping process? What documents do I need to submit on a monthly basis? How do I do this?
  5. How frequently and timeline can I see my up to date financials? Do I see my financials on a month-to-month basis? Quarterly?

Now you know what ask, you’ll probably want to know how a good bookkeeper should reply.

Well, you are in luck. 

We’ve created a FREE extended guide called “5 Things to Ask Before Choosing Your Bookkeeper – And The Responses They Should Give You.”

We’ve shared insights that will help you understand how bookkeepers operate, bill, and deliver results. Most importantly, the guide details exactly what a good bookkeeper should tell you when you ask those questions. Our guide is a must-read for those looking to save time and money.

Download Your Free Guide Today!