Hiring a bookkeeper should make the financial side of the business easier to follow.
That does not mean you stop seeing the books or hand over every financial decision. A professional bookkeeping service should give you a current accounting file, a consistent process for handling documents and transactions, and reports that can be reviewed without first spending hours fixing old entries.
The exact scope varies by provider and by business. A clinic with payroll and card processor deposits will not need the same workflow as a consultant with a small number of monthly invoices. A franchise owner with several locations may need reporting that a single-location business does not.
Still, there are some practical things you should expect from a professional bookkeeping service.
The Service Should Start by Understanding the Existing Books
Before regular monthly work begins, the bookkeeper needs to understand what they are taking over.
That includes the accounting software, bank and credit card accounts, payroll setup, GST/HST accounts, outstanding receivables and payables, loans and any owner or shareholder accounts already on the balance sheet.
If previous bookkeeping is behind or inconsistent, the file may need cleanup before monthly reporting can be relied on.
For example, opening balances that do not agree with prior statements can continue appearing in every future report until they are corrected. The same is true of old credit card balances or GST/HST accounts that were never reconciled.
A professional provider should identify those issues rather than quietly carrying them forward.
Bank and Credit Card Accounts Should Be Reconciled
Reconciliation is one of the basic controls in a bookkeeping process.
The accounting file should be compared with the actual bank and credit card statements so missing, duplicated or incorrectly posted transactions can be identified.
A bank feed alone does not do this work.
Importing transactions into accounting software can save time, but the bookkeeper still needs to determine what the transaction represents and make sure transfers and payments have not been counted twice.
If a business transfers $5,000 from one corporate account to another, that should not suddenly make the business look as if it earned another $5,000 in revenue.
Regular reconciliation helps prevent that type of error from staying in the reports.
Transactions Need Enough Detail to Make Sense Later
A transaction category should explain what happened.
“Office expense” may be reasonable for a routine supply purchase, but it does not tell the full story when the payment was actually for computer equipment, a loan, professional services or an owner reimbursement.
The bookkeeper should use the chart of accounts consistently and ask questions when the transaction cannot be identified from the available information.
Supporting documents matter too. CRA requires businesses to maintain records that support income and expense claims, and GST/HST registrants need appropriate documentation for input tax credit claims.
A bookkeeping process should therefore include a practical way to collect receipts, invoices and other supporting records instead of waiting for a year-end search through email and paper files.
Payroll Should Be Reflected in the Books
If the business has employees, payroll needs to connect with the accounting file.
The bookkeeper may not be the person processing payroll, but the books still need to show the expense and liability side of each pay run.
Employers may need to deduct CPP contributions, EI premiums and income tax and remit those amounts together with applicable employer contributions.
A net payroll withdrawal from the bank account does not capture all of that information by itself.
The bookkeeping file should show the gross wage expense, payroll deductions, employer costs and remittances in the appropriate accounts. This makes the financial reports more useful and makes it easier to compare the accounting records with payroll filings.
GST/HST Should Not Be Left Until Filing Time
For a GST/HST registrant, the tax recorded on sales and purchases should be kept current during the bookkeeping process.
Waiting until the return is due to work out what happened can create avoidable cleanup.
The bookkeeper should record GST/HST according to the information available on invoices and expenses and keep the related accounts organized for filing or review.
Businesses with unusual or mixed tax treatment may need the accountant to step in. A bookkeeping service should know when an issue needs tax advice instead of making assumptions.
The CRA requires GST/HST records to contain enough information to determine the tax that applies and support amounts claimed or reported.
Monthly Reports Should Come from Reconciled Records
A financial report is only useful if the underlying accounts have been reviewed.
At minimum, many businesses will receive an income statement and balance sheet as part of regular reporting. Depending on the business, receivables, payables, cash flow information or location-level reporting may also be useful.
The report should not arrive as a file that nobody discusses or understands.
If revenue increased sharply, the owner should be able to tell if that reflects actual sales or a posting error. If the balance sheet shows a large shareholder loan or old GST/HST liability, that balance should not sit there indefinitely without explanation.
Professional bookkeeping reports should make it easier to ask better questions about the business.
Expect Questions from Your Bookkeeper
A bookkeeper asking questions is usually a good sign.
The person entering transactions cannot always tell from a bank description what a payment was for. “E-transfer” does not explain if the money went to a contractor, reimbursed the owner or moved between two company accounts.
The same applies to deposits.
A bookkeeper should have a consistent process for asking about unclear items instead of guessing. The owner, in turn, needs to answer those questions and provide missing documents within a reasonable time.
Good bookkeeping is a shared process. The provider can maintain the records, but they cannot know facts that were never documented or explained.
There Should Be a Clear Month-End Process
A professional service should have a point when the month is considered reviewed rather than leaving the file permanently half-finished.
That might involve completing reconciliations, clearing questions with the owner, posting payroll, checking GST/HST accounts and preparing the agreed reports.
The timing will vary. Some businesses need monthly reporting soon after month-end, while others can work with a longer cycle.
What matters is that both sides know when documents are due, when questions will be sent and when the reports should be ready.
That consistency becomes increasingly useful as transaction volume grows.
Clean Books Should Be Ready for Tax Work
Bookkeeping and tax preparation are separate tasks, but they rely on the same records.
By year-end, the accountant should not have to rebuild several months of transactions before beginning the tax work.
There may still be adjusting entries. Accountants commonly need to review depreciation, income tax balances, owner transactions and other year-end items. That is different from discovering that bank accounts have not been reconciled or that half the year’s expenses still need supporting documents.
For incorporated businesses, the T2 Corporation Income Tax Return is generally due within six months after the tax year ends. Current bookkeeping gives the accountant a better starting point well before that filing deadline.
CRA-Ready Does Not Mean Expecting an Audit
The phrase CRA-ready bookkeeping describes records that can support the amounts being reported.
It does not mean the business is preparing for an audit every month.
If CRA asks about a business expense, the invoice or receipt should be available. If payroll amounts are questioned, payroll records should connect with what appears in the accounting file. GST/HST claims should also have the supporting documentation required for the amounts reported.
CRA states that businesses are generally required to keep records for at least six years from the end of the last tax year they relate to.
Keeping those records organized as part of normal bookkeeping is much easier than reconstructing them later.
What a Bookkeeping Service Should Not Do Without Enough Information
Professional bookkeeping involves judgement, but it should not involve guessing.
An unclear owner withdrawal should not automatically be categorized as an expense. A payment to a worker should not be assumed to be contractor expense if the underlying relationship has not been established. An unusual GST/HST transaction should not receive a tax code simply because similar transactions did in the past.
When the facts are unclear, the bookkeeper should ask. When the issue requires tax or accounting advice, it should be referred to the appropriate accountant or advisor.
Knowing when not to make an assumption is part of maintaining reliable records.
What the Business Owner Still Needs to Do
Outsourcing bookkeeping does not remove the owner from the financial process.
The owner still needs to provide documents, explain unfamiliar transactions, approve payments where applicable and review the reports.
The business is also responsible for giving the bookkeeping provider accurate information about changes such as a new bank account, loan, employee, location or significant purchase.
A professional service should make those responsibilities easier to manage by having a clear process rather than relying on last-minute requests.
What Good Bookkeeping Should Look Like After a Few Months
After the service is running properly, the difference should be visible in the file.
Accounts should be reconciled through the agreed period. Old unanswered transactions should not continue accumulating. Payroll and GST/HST balances should have a clear basis. Reports should arrive consistently and should be easier for the owner and accountant to review.
That is a more useful measure of bookkeeping services for small business than the number of transactions someone can enter in an hour.
For businesses looking for recurring bookkeeping that coordinates with payroll, corporate tax and CRA compliance, Ebrahimjee & Essaji Professional Accountants provides accounting and bookkeeping support from its Mississauga office for businesses across the GTA and Ontario.