Bookkeeping and accounting for Canadian franchisees
Franchisees, as Canadian business owners, are required to comply with the Income Tax Act by maintaining stringent financial records and balancing the business's books. Failure to do so can result in hefty fines and potentially criminal action.
For this reason, if you are not confident in your ability to balance the books, you should either seek training in the art of bookkeeping or employ an accountant to support you in maintaining accurate financial records. Your franchisor will also want to see specific financial information on a regular basis and could terminate your contract if this information is not forthcoming, inaccurate or misleading.
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Bookkeeping and accounting
Bookkeeping is a process in which business transactions are tracked and records and receipts are kept. Accurate records collected during the bookkeeping process then inform financial accounting, which is the formal process through which all financial transactions are reported to the appropriate authorities.
There are many bookkeeping courses available to business owners, and it is always sensible to attend this type of course when you first decide to shift from employee to business owner. This can ensure you understand the rules and regulations you must follow and teach you how to manage your financial affairs correctly.
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Why financial records are so important
Financial accounting is mandated by law, but it is a valuable skill for several other reasons as well. First, it allows you to understand who your business owes money to and where its income comes from. It also enables you to develop a strong understanding of the function of the business that can inform its future direction. By understanding the money, you can target investments to maximize your gains.
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What your accountant will need to know
Your accountant will want to see all of your financial records on a quarterly basis. They will need to understand your cash flow forecast, a detailed analysis of the sales taxes you have paid or charged, and if you have employees, they will check that your payroll has been completed correctly.
A qualified accountant will advise you on appropriate bookkeeping software and ensure that the information you collect meets the requirements of the Canadian Revenue Authority, your franchisor, your stakeholders and any investors or lenders who have a vested interest in your financial security.
Your accountant will ensure you pay the right taxes at the right time so you do not incur penalties and interest charges.
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Benefits of outsourcing accounting
Bookkeeping and accounting are time-consuming and mentally demanding, and the submission of inaccurate or misleading data could have serious ramifications for your business. For these reasons, outsourcing to a professional is a sound decision that will deliver an excellent return on your investment while providing peace of mind and more time to focus on tactics and business strategy.
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