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As I outlined in last week’s post on personal tax deductions, I’ve prepared taxes for all of my adult life and I prepare taxes for clients around my area in Canada. In doing so, I’ve learned a few things that have helped make my refunds grow every year. In this post I’m going to go over the types of deductions you should be taking advantage of for your small business. Again, this information is for Canada only.

As a small business, you should be tracking your business expenses throughout the year. This means, you know what you’re spending to keep your business running. The good news is that most of the money you spend to run and grow your business can be considered a deduction at the end of the year.

Here is a basic list of expenses that every business should be taking advantage of to reduce your gross income. For a full list visit <http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/bsnssxpnss/menu-eng.html> You may find that this list matches up to your list of chart of accounts from your accounting software. This is on purpose so it should be easy to see what type of expenses you are able to claim.

Accounting and  Legal Fees

This includes your bookkeeper or accountant. So when you hire a bookkeeper or an accountant to do your taxes or corporate taxes you can deduct their fees.

Advertising

Did you run an advertising campaign on Facebook or set up an email newsletter? Expenses for Facebook ads, Google ads, print ads or anything you spent money on to advertises your business is deductible. Don’t forget that your Etsy listing fees are considered advertising and should be claimed here.

Automobile expenses

Look at the cost of fuel, motor oil, lubricants, your license, registration fees and insurance but only the portion of use you use the vehicle for business purposes. Be sure to calculate what portion is business use versus personal use. It also helps to keep a mileage logbook of your business travel to help break this down. Remember this expense is for automobile travel only, other travel expenses are calculated under a different heading.

Bad Debts

Hopefully this will not happen to you, but sometimes we will encounter a client who does not pay for our services. That money can be claimed as bad debt.

Bank Charges

Any banking or checking account fees can be claimed here.

Interest Expenses

If you take out a loan to help run your business, more than likely there will be interest on that loan. Interest on loans to start a business is tax deductible.

Insurance Expenses

You can deduct insurance premiums on the building, machinery or equipment you use for your business.

Membership Dues

If you’re a member of any business related organization, these dues are tax deductible. For me, I belong to IPBC and pay an annual membership due. IPBC keeps me certified as a bookkeeper and these fees are deductible on my business taxes.

Meals and Entertainment

Any business related meal or entertainment, such as a social gathering for clients is tax deductible, but only up to a certain point. For example, only %50 can be claimed in certain Provinces across Canada.

Office or Studio Rent

Do you rent office or studio space to run your business out of? This amount can be fully deducted from your taxes.

Office Supplies

This expense is considered for things you purchase to run your business such as paper for your printer, staples or pens. You can expense anything that isn’t involved in the making of your product or service.

Postage and Courier

Anytime you send out parcels through Canada Post, FedEx, or Purolator for business purposes, are considered tax deductible.

Telephone/Telecommunication Expenses

If you have a dedicated phone line for your business this is a tax deduction, otherwise a telephone is considered under Business Use of Home Expenses. You can also claim your internet and cell phone usage here.

Travel Expenses

Any expenses incurred while traveling for business, ie your plane fare, accommodation, taxi fares and meals (up to 50%). Remember to keep your receipts!

Business Use of Home Expense

If you have a home office, instead of a dedicated office space outside of your home, you can calculate how much room in your house you use for your home office and then calculate the percent of utilities, telephone, insurance, property taxes, rent, and maintenance that is allocated for the home office. That number is deductible. Check out this EXAMPLE

Capital Cost Allowances

Capital property such as  buildings, equipment and vehicles you use for your business are deducted here at an annual rate. You cannot claim the full amount on your taxes, instead there is a portion that Is calculated on your taxes each year. Commonly known as CCA. For example if you are a photographer, you would claim your cameras, computers and hardware. You would need to find what it is classified as, and calculate the rate of depreciation, which you can claim every year.

Cost of Goods

This deduction is any raw materials you purchase to produce your products. This is not to be confused with the tools you use, nor are these considered Office Supplies.

And there you have it. A basic list of the business expenses you should be claiming on your taxes for your business. If you have questions about what you can and cannot claim you can sign up for a consultation with me.

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I’ve prepared taxes for all of my adult life and now I prepare taxes for clients around my area in Canada. In doing so, I’ve learned a few things that have helped make my refunds grow every year. In this post I’m going to let you in on a few deductions everyone should be taking advantage of if you’re not already. Again, this information is for Canada only.

For individuals

As soon as you start earning a wage, open up an RRSP (Registered Retirement Savings Pension.) When you put aside the maximum amount allowed per year (check your Notice of Assessment) then you reduce your net income, thus reducing your tax owing. Income from RRSP is taxed only when it is withdrawn and will earn higher rates of interest than a regular savings account. You can check at your local bank to open an RRSP.

Home Buyers Plan

For new homeowners, you can take your RRSPs, tax free, and put a down payment on your new house! This is for first time homeowners only and you have five years before having to pay back your RRSP and the good news is that payback is simple. It goes right onto your T1 General under “HBP.” This amount gets subtracted from your TOTAL RRSP contributions.

Child Care Expenses

Whether your child is in 7$/day daycare or private daycare, you can deduct the fees incurred for daycare. To take advantage of this deduction, you will need the social insurance number for the daycare provider.

Donations and Gifts

Did you know that by giving a tithing to some churches you can enter them as a donation? It is also better to claim donations over $200 and you don’t have to claim a donation in the same year. If you have one donation this year of $100 and next year you expect the same, you can claim the $200 on next year’s return. You can also claim any type of charitable donation that gives an appropriate tax receipt and not just churches.

Children’s Arts Tax Credit

You can claim up to $500 of fees paid per child in regards to artistic, cultural, recreational, or developmental activity. This includes private lessons in music, art, and tutoring. For example, I had a tutor for my son to help with speech development and was able to use this credit for those sessions.

Children’s Fitness Amount

You can claim up to $1000 of fees paid per child in a physical education program. This includes hockey and soccer teams, skating, golf lessons, horseback riding, sailing and bowling.

Medical Expenses

There are limits to what we can get our insurance companies to pay for such as dentistry. I keep all of my dental bills and enter them as a medical expense. Here is a big list of eligible medical expenses you can deduct: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/330/llwbl-eng.html

These are just a few of the deductions available to Canadians come tax time. Look them over and see if you’re eligible to use them in your tax planning. These expenses are ones that I have used in my adult life and have helped me in getting a refund each year.

Next time, I’ll go over deductions you should be taking for your business.

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Does the date April 30th, give you the hives? Are you allergic to filling out tax forms? Scared of what you’ll find in the numbers? If you’ve read my last post about filing your taxes yourself and broke out into a cold sweat, have no fear, because this week I’m focusing on hiring a tax professional to do your taxes for you.

If on the other hand, if you want to file your own taxes, take a look at last week’s post for how to go about it in a calm and timely manner. And while there are many similarities between the U.S. and Canada on how to hire a tax professional, this post is focused on how to go about it in Canada. Let’s get started!

While hiring someone to do your taxes can be a stress relief, you still want to do your due diligence when hiring a tax professional. You’ll need have your 2014 bookkeeping closed out and you’ll need to be prepared to answer questions about your business activities.

If you have a bookkeeper already, they are a great place to start in terms of looking for a tax professional. More than likely they are willing and able to file your taxes for you. After all, they already know the ins and outs of your finances and it could make the process a whole lot smoother.

If you don’t have a bookkeeper, a great place to start looking for a tax professional is via your friends. Ask for referrals from people you know. Chances are your friends have a tax professional they trust. You can also inquire of your business peers who they use to file their taxes. This is another great place to get a trusted referral and more than likely one who already understands your type of industry which can be a boon when discussing business activities.

When you hire a tax professional, you will be paying for a service, so keep this in mind and within your budget. You want to make sure that the person you are hiring is reputable and knowledgeable. You don’t want to have your Grandma or Uncle Phi file your taxes because they’ll do it for cheap.

You’ll also need to start looking for a tax professional as early as possible. You don’t want to wait until April to try and find someone. If you do, it will be much harder as April is a very busy time and they may not have room in their schedule to fit a new client in. You may also end up having to spend more money since April is right up on the filing deadline.

It’s best to start looking for someone at in February and no later than March. If you weren’t able to get a referral from a friend or business colleague you can look online or in your phone book for tax preparers. You’ll need to make sure that the tax preparer has a tax filer number, which means they are registered with the government and are allowed to do this type of work and every tax preparer in Canada needs to be registered for E-file to file taxes.

You may want to inquire of their schooling and look for an accounting diploma, but know that even H&R Block preparers may not have a specialized accounting diploma. They will have had extensive training though and be certified through their company.

You will also need to know what type of relationship you will want with your tax preparer. Will you want an ongoing relationship? Then you may want someone who you’ll meet with one on one and know that they will be doing the work. On the other hand, a service center such as H&R Block will have a handful of people trained in tax preparation, but you may not know who actually performs the data entry.

Compare price vs services. Do you need more than just tax data entry? For example, do you have a business to report? Do you also want advanced tax planning? You need to know what you need as some tax preparers only do just that, prepare taxes. You must ask if they will also advise you on tax deductions if you need that type of service. You’ll also need to look for a preparer that will be able to do business taxes, as not all preparers will be knowledgeable about business taxes.

Once you find a tax preparer that you like, you’ll need to come into your meetings with them prepared. Have all papers ready, like your T4’s, RRSPs, investment income, rental costs, and Statement of Business Activities if applicable. Most tax centres and possibly some tax preparers will have a form to fill out with questions about your situation, and have suggestions on which forms to bring. You’ll also need to know about your previous year’s filings. If they don’t ask about your previous tax year, that is a red flag.

You may have several meetings when you hire a tax professional. You’ll make an initial appointment to go over all your documents. Then another meeting once the tax has been prepared. You’ll have to go in to sign and file the final forms. Your tax preparer will explain your tax return process and they’ll file your return in front of you.  If you’ve picked a professional for their advanced tax planning services, they will advise you on your retirement calculator and discuss any further tax planning for next year and possibly beyond.

Your tax preparer will be able to send your return electronically, via E-file. But you always have the option to take the return papers yourself, and mail them to the government. Keep in mind though, that refunds are generally received a lot sooner if filed electronically. You will also be able to receive a refund quicker if you have applied for Direct Deposit!

Once everything has been signed and sent off to the government, you should receive a Notice of Assessment, which will have your limits for RRSP deductions, and the assessment of the return itself. The government will determine if your return was prepared properly and whether a refund or balance due was declared.

Don’t forget! You must also keep all your papers for 6 years after filing. The papers for your current taxes don’t get sent through Efile, so keep those handy in case the government asks for them. Your tax preparer will only keep a copy of the return – so you should keep all of paperwork, including a copy of your return.

Hopefully the process of finding and filing your taxes with a tax professional is smooth and easy. Keep up the good work by getting a jump start on tax planning for 2015. In next week’s post I’ll go over some deductions that you should be taking advantage of.

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As a bookkeeper catering to crafty people, I receive a lot of inquiries about my services. Some turn into great clients such as A to Z of Motorcycles  but many others are small Etsy shops who think they can’t afford my services. This happens more often than not and I wonder how they are managing their money, or if they’re only treating their Etsy shop as a hobby, parading as a business.

You see, having a shop on Etsy is a business, whether you want it to be or not, and you need to treat it as such. I believe that this is all a state of mind and something I experienced when I opened my knitting shop Petite Tuques.

Before I turned to the internet, I was creating hand knits for friends and family. I was “testing” my customers and my own talent to see if I really could sell my hand knits. I got a lot of feedback and decided to open an online shop. I debuted my first shop on Nov 21, 2009 on iCraftGifts.com and nothing happened. My first online sale from a person I didn’t know happened on July 9, 2010. A month before that, I opened my shop on Etsy and once again, I didn’t see any sales from people I didn’t know until July 18, 2010.

When I opened that first shop, I invested a lot of money into materials, for items that weren’t selling. As you can see, I waited a long time before I had my first sale, and even more time went by before my next sale and my sale after that. When you start a business, I thought you had to put all your money in because people would be clamoring at my door for what I was selling. But nothing happened because I didn’t give my business the time and attention it needed.

I thought it was just a hobby. It was fun to see people eventually buying from me, but I didn’t take it seriously. I had all these bags of yarn because I anticipated sales without marketing, blogging or all the other things you need to do to attract and obtain attention to your shop. I just expected people to find me because my hats were super cool. But I wasn’t telling anyone about my super cool hats.

The time between when I opened my shops and when I made my first sale, was a wake up call. I needed to make a change if I wanted to make sales. Something wasn’t working, I wasn’t succeeding. When you do the same thing over and over and it doesn’t work you have to mix things up. I started to research what it really took to have an online business and it changed everything for me. I learned how to market my business, how to blog, and how to have a proper website. I started taking it seriously. I read blogs, got a Facebook page and researched yarn businesses. I redirected my focus to increase my sales and manage my money better.

I found great business coaches like the Blacksburg Belle, who really helped me. I did a couple of her courses like How to Blog for your Creative Business. I also joined her networking site, Artpreneur, while it was around. Through her, I met a lot of successful people, like Mayi Carles and learned by interacting and observing them. I also found other knitters who were selling online. I joined knitting sites and knitting groups. I found that they were a great help and instead of competitors they became my colleagues.

If you’re struggling with your Etsy shop, you maybe in the mindset that it is more of a hobby than a business. It can be stressful, having money invested in something that is not making you sales. It can really get you down. If you want to make the switch and change your mindset and really start taking your business seriously, I highly recommend finding a business coach, like Blacksburg Belle, or Mayi Carles, to get you on the right track. It’s a great first step and one that turned my business around.

Ready to turn your hobby into a business? Do you need guidance on how to do it legally? Contact me today to find out!

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Hello and welcome to the 10 Day #LoveYourBookkeeping Challenge. This challenge will help you better understand what bookkeeping is all about.

So, first of all and if you are here, I want to congratulate you on making a smart and happy choice towards loving your bookkeeping and having a fully organized business. Cheers to your success in 2015!

LOVE

By committing to the next 10 weekly days you’re taking small business steps in the direction of knowing what bookkeeping is all about and at the same table you are also setting yourself up for success.

The aim of this challenge is really easy and simple:

  1. I want to teach you the why and the how of bookkeeping;
  2. I want to offer your tips and small daily/weekly/monthly tasks so you can track and improve your business ‘to-do’s’
  3. I want to provide you tools and resources so you can learn, dive in deeper and act!

I am truly happy you are here learning, cheering and just being the amazing creative entrepreneur you are!

Let’s get started…

It’s really simple to join this loving challenge and there are four ways you can do that.

  1. Enter your name and email address in the following link.
  2. Like us on Facebook and get our notifications.
  3. Follow us on Twitter and tweet lovingly every day.
  4. Follow along on Instagram.

Cheers to you and your amazing business!

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10-Day #LoveYourBookkeeping Challenge

Join me in this amazing 10 Day Challenge and make 2015 the year you’ll #LoveYourBookkeeping!

This loving challenge will deliver you 10 days of bookkeeping information & resources. Each daily prompt only takes a few minutes of your attention, nothing more, nothing less.

I know it’s January the month to start fresh, the month we’re still a bit overwhelmed with new ideas to implement on our business and we feel a bit lost with all these goals and intentions we are juggling and trying to implement. After a few years in business I came to the conclusion that almost all online creative business owners forget or dread one of the most important parts of business – bookkeeping. And it’s also a known fact that a lot of people find it to be the most boring part of running a business.

Fear not, this is about to change and by the time this challenge is over, you will be prepared to embrace this new year and your business bookkeeping in a more caring and loving way.

And did you know that I’m offering all this for FREE!

We start February 2nd.

It’s really simple to join this loving challenge and there are four ways you can do that.

  1. Enter your name and email address in the following link.
  2. Like us on Facebook and get our notifications.
  3. Follow us on Twitter and tweet lovingly every day.
  4. Follow along on Instagram.

If you sign our newsletter I’ll also send you a welcome email for this unique challenge. Then every day – from February 2nd – February 13th you’ll be able to check our bite-sized #LoveYourBookkeeping Challenge spread all over all our social media accounts.

The more we share, the more we have. – Leonard Nimoy

So, if you can spread the word about the #LoveYourBookkeeping Challenge with your family, friends and online acquaintances!

Thank you so much for all your support!

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The new year is a great time to reflect and think on the year past. It’s also a good time to cast your eye to the future and think about where you want your business to be in a year’s time. What will your business look like? How will you get there?

To accomplish what you envision for yourself and your business, you can set specific business goals you want to achieve over the course of the new year. I plan on setting goals for my business and I highly recommend you do the same.

I started reviewing my past year, after closing out my business finances and answering the very important questions Blacksburg Belle sets out in her yearly review post. It has helped me see where I am, where I’ve been, and where I want to direct my business in 2015.

In answering these questions for my business, it has helped inform the following goals for 2015:

My Business Goals for 2015

  • Acquire five new clients
  • Finish two professional courses
  • Continue with my blogging and social media schedule

Over the years, I’ve learned that it is best to start small. I plan on accomplishing my goals in very specific ways. To acquire new clients, I plan on applying to jobs on sites like oDesk and do research online. I’ll do this at least once a week and follow up with any leads. My two other goals will also support the first. I also want to turn any contract work into invoicing clients.

To finish my professional courses, I need to work at it everyday. I need to read and do the work, continuously, until the course is finished. I will set aside one to two hours every night to for this work. I am currently working on an April completion for a course on Advanced Bookkeeping and then an August completion for Advanced Payroll. I keep myself up to date with the bookkeeping industry because it helps you, my clients. Read more about why I keep up with certifications and the industry.

Keeping a blogging and social media schedule is hard work, but I am lucky to have help in this area and plan to continue to rely on this help to keep me on track. I’m going to continue these relationships, and keep my blog and social media updated and current.

What about you? What what are your business goals for the year?

To get started, you can answer the same questions from the Blacksburg Belle to help inform your business goal setting for 2015. If you’re stuck with setting goals, here are some financial goals for you to consider:

  • Keep your books up to date – Whether that’s doing them on a weekly or monthly basis, get in the habit now.
  • Keep up to date with your invoicing – This will help you see how much money you’re taking in on a weekly basis. This is also helpful if keeping up with your bookkeeping is too much.
  • Save your money – Set aside five to 10 percent of your income. Put it in a tax free savings account and forget about it.
  • Hire a bookkeeper – Keeping up to date with your bookkeeping not for you? You can hire me, and help me get closer to achieving one of my business goals in 2015.

Do you plan on setting business goals? I’d love to hear about them in the comments.

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photo credit: blacksburgbelle.com

In the very the last post in the Wrap Up 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  Expenses, and Invoices blog posts and do that work before moving ahead. You will then need to have all of the bank reconciliations done and ensure that any missing transactions are added. To do that, see last week’s blog post for further information about reconciliation. 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.

Step 1: Write down all the accounts in order

Write down all the accounts in order of:

  1. Assets
  2. Expenses
  3. Liabilities
  4. Sales
  5. Equity

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.

To make it easy, have the spreadsheet calculate Totals per month, and then a Grand Total for the Year. (Already done for Bookkeeping Spreadsheet)

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.

Here is an example of a trial balance: Download to use and add rows as needed.

Trial_Balance

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

For Online Accounting Software

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

For Xero: Go to Reports, then All Reports, then Detailed Reports and 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, then Trial Balance. You can also export this to Excel, CSV or PDF.

You have now successfully closed out your accounts for 2014! Congratulations. This means you are ready to start 2015 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!

 

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If you’ve been following along with the End of Year Wrap Up posts, you should be well on your way to logging your yearly expenses and invoices. Today we are going to cover the next step in closing out your books for the year. It involves reconciling your accounts and can be a tedious step. But stick with me as I walk you through it.

Sometimes it is easy to overlook reconciling your bank accounts, but it is important to do as it helps you get a clear idea of what your business is worth and how much liquid assets you have. You also need to document the little charges that show up in your bank account. You’ll also be checking to see if your accounts are correct and then adding in the little charges.

If you are using a spreadsheet, then the bank reconciliation process can be a long one. Just like entering your expenses and invoices, I recommend you do this step when you have an hour of stress-free time.

Step 1: Gather your bank statements

Again, starting from the end of the previous year, consult your December bank statement, then each bank statement for each subsequent month. This process includes paypal accounts and credit card accounts. Note: The ending balance of December 2013 should be identical to the beginning balance of January 1, 2014.

Step 2: Set up your spreadsheet

I’ve provided a sample spreadsheet and how you should set up the spreadsheet for bank reconciliation. Feel free to continue using the sample spreadsheet for this step. Add more rows if needed. Download to use!

Bank_Rec

Step 3: Enter in any bank fees or interest

Looking at your accounting books (if you’ve been keeping them throughout the year) or your expense/invoices on your spreadsheet, you’ll need to enter any bank service charges, insufficient fund, check fees or interest earned on your bank account. While these charges are easily seen on your bank statement, more than likely, they haven’t made it to your accounting system and this step adjusts for them.

Again, starting from January 1, deduct any bank service charges to your spreadsheet. A bank service charge are the fees banks charge for having a checking account, or fees for overdrawing your account, for example. Deduct any NSF checks, or checks that bounced and didn’t have sufficient funds. You also need to deduct any check printing charges. These occur when a company arranges for their bank to handle the ordering of its checks. The payment comes out automatically from the checking account. You then want to add any interest you may have earned on a cash balance in your account. You usually see this in a savings account, but you can also have earned interest on other accounts if that is a feature of your account type.

Once you have added these deductions and additions, you need to make the adjustment on your spreadsheet.

Balance per Books on December 31, 2013

Adjustments:

Deduct: Bank service charges

Deduct: NSF checks and fees

Deduct: Check printing charge

Add: Interest earned

Adjusted/Corrected Balance per Books

Quick Tip: Put it where it isn’t. If there are bank fees on the bank statement, but not recorded in your bookkeeping spreadsheet, adjust the book balance with a credit to cash (negative number in Bank Reconciliation spreadsheet).

Step 4: Enter any missing deposits in transit and outstanding checks

Starting with your balance per your bank statement on December 31, 2013 add your deposits in transit and deduct any outstanding checks.

A deposit in transit is money received and recorded by the company but not recorded by the bank. For example: you had a craft sale on December 31 and you documented the total sales of $300 in your company records. You then went to deposit the money at the bank after hours. That transaction will not be recorded on the bank statement until January 1 2014. The amount needs to accounted for by adding it to the correct month you conducted the sales.

Outstanding checks are checks written and recorded by the company, but have not yet cleared the bank. For example: you wrote out a check to your supplier for $150. This amount is recorded in your cash account of the company, but not on the bank statement, since the bank is closed until January 1 2014.

Once you add your deposits in transits and deduct any outstanding checks, record the adjustment to your book balance for January 2014.

Balance per Bank Statement on December 31, 2013

Adjustments:

Add: Deposits in transit

Deduct: Outstanding checks

Adjusted/Corrected Balance per Bank Statement

 Quick Tip: Put it where it isn’t. A deposited in transit was recorded in your bookkeeping spreadsheet, but not in the bank statement. Adjust the Bank Statement with a debit to cash (positive number in Bank Reconciliation spreadsheet).

Step 5: Bringing it all together

After adjusting the Balance per Books (Step 3) and Balance per Bank Statement (Step 4), the amounts should be equal.

Now that you have all of your adjustments, you need to enter them into your Bookkeeping Spreadsheet. Remember your Debit/Credit training? Additions are debited to your bank account and Deductions are credited.

How do you do this in an online accounting software?

With Wave: Bank rec is a new feature in Wave. To see if an account has the same balance as your statement, you must use the Filter by “Accounts” and all transactions for that account will fill the transaction screen. Then every verified transaction will have a “verified balance” and the top bar will show the Difference between the Online Statement and Verified Balance. A difference of Zero (0) means that you are reconciled.

With Xero: Within every Bank account, there is a Reconcile Tab. Every transaction needs to be matched with an invoice or expense, or marked as spend money/received money. Once the transactions are reconciled, “Statement Balance” and “Balance in Xero” will match. However, this system is not foolproof, and you still must compare your bank statement. If these balances don’t match, it may be because the auto sync missed some transactions and you’ll have to manually upload a statement with the missing lines.

Congratulations! You’re almost done with closing out your business accounts for the year. There’s actually one more step that needs to be done, so stay tuned next week for one final end of year wrap up how-to.

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