It can be very overwhelming for business owners to learn how to enter bookkeeping information into their accounting software says Edmonton bookkeeping. But this is an extremely important task for any entrepreneur.
The reason why, is because the more up-to-date the financial information and their accounting software is. And the better information they will have on their financial statements.
Since business owners should be using their financial statements any time they need to make a financial decision. The more up-to-date the information is. As well as how accurate the information is. The better information they will have to make their decisions with.
Many entrepreneurs often end up not using information in order to make financial decisions. Such as if they are going to run payroll, or when they go to pay bills. Which can end with them spending more money than they have. And can cause them to bounce payments.
Other business owners try to use the information that they have to make informed financial decisions says Edmonton bookkeeping. This results in entrepreneurs looking at their bank account in order to understand how much money they have in their business.
And while this might sound like a good way to make informed financial decisions. The amount of money that they have in their bank account at that moment. Does not necessarily reflect how much money they have in their business to utilize.
A good example of this is when an entrepreneur has written several checks that are waiting to clear. Or if they have scheduled electronic fund transfers that when they are looking for financial information.
Show that an entrepreneur has a certain amount of money. But that is not how much money that will be left over once those checks clear. Or when the electronic fund transfers go through. This is why bank accounts are not the best place for entrepreneurs to look for how much money they have to utilize.
Instead, Edmonton bookkeeping suggests entrepreneurs look at their financial statements instead. Because it will show an entrepreneur how much money they have to utilize. Once all of the payments that they have scheduled have come out.
In addition to that, entrepreneurs will be able to see what their debt servicing is. And how much money they owe vendors, and how much is past due.
That way, business owners will bill to make better and more informed financial decisions. About whether they can run payroll or make a purchase. Or if they need to generate more revenue, or do some collection calls to bring money in. Before we can those financial decisions.
Therefore, the sooner entrepreneurs first of all know how to read their financial statements. In order to make more informed decisions in their business.
But also the sooner that entrepreneurs are able to learn how to do some of their own bookkeeping. And to do it correctly, so that they are not making critical errors. The more information that business owners will be to have in their business.
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When business owners understand how important it is to enter their financial information into their accounting software says Edmonton bookkeeping. The sooner they are going to be able to have the best tools of their disposal for making financial decisions.
However, when it comes to entering tax payments into their accounting software. There are several things that entrepreneurs need to know. In order to enter the information as correctly as possible.
The first thing that business owners need to keep in mind is what the tax expense account is. This is the account where their accountant will be putting how much taxes they have calculated the business to oh in the previous year.
Only one entry should be made per year. And that will be made by the accountants, after they have completed the corporate year-end for the business. The business owner will see the total amount of taxes that they owed for the previous year in this account.
As they make their tax payments says Edmonton bookkeeping. The amount owing in their tax expense account will decrease. Until the amount that they owe is zero.
However, a business owner should ensure that they are continuing to pay their taxes in instalments. Because when their tax expense account is zero. That just means that they have paid the taxes for the previous year.
By continuing to pay taxes in instalments. Edmonton bookkeeping says that they can start paying the taxes that they will end up owing for this year. And have already made several payments. So that it will be less money per month that they have to pay for the next year.
Therefore, they should never be putting anything into the tax expense account at all. But put all of the taxes that they pay into the various tax payable accounts that exist.
It is very important that entrepreneurs know this. Because when they entered the tax payments into their tax payable accounts. Their accounting software will default to the tax expense account. They must know to not accept the default for their accounting software to put information.
Instead, business owners need to understand that they have to put all tax payments into the tax payable account. And more specifically, into the correct tax payable account depending on what tax they are paying.
This means an entrepreneur needs to take into consideration that there is federal as well as provincial tax accounts. As well as one for GST, and several for payroll taxes because there are many different payroll taxes that they have to pay. This includes employer and employee portion for CPP and EI.
The sooner entrepreneurs can understand the differences in their tax payable and tax expense account. And that their accounting software will want to default the information to the wrong place.
And the sooner an entrepreneur is prepared to enter the information correctly into their accounting software says Edmonton bookkeeping. By learning this early on in their business. Business owners can avoid making several critical errors, that will end up impacting how much taxes it looks like they owe.