Do I Need a Bookkeeper for My Small Business?

Does the law require a bookkeeper?

No. What the law requires is records. Anyone carrying on a business, filing a GST/HST return or paying payroll deductions has to keep them, and the CRA notes that holding companies and inactive corporations are no exception.¹

The CRA expects those records to be reliable and complete, to hold what is needed to meet your tax obligations, and to be backed by documents: invoices, receipts, bank statements and the like.^2,1 Generally they are kept for six years from the end of the last tax year they relate to.³

Who does the work is up to you. A bookkeeper is one way to make sure it gets done every month, rather than all at once before a deadline.

When do you need one?

Usually at one of a handful of turning points. Each adds work that runs on the books:

• Starting out as a sole proprietor. Business income goes on your personal return, with a statement of business activities such as Form T2125.⁴ With a separate bank account and every receipt kept, many owners manage this alone.
• Registering for GST/HST. A registrant files a return for every reporting period, even one with nothing to report,⁵ and claims back the GST/HST on its purchases as input tax credits, which need the purchase records behind them.⁶ Our guide to when you have to register explains the threshold.
• Hiring your first employee. You need a payroll account before the first remittance is due,⁷ deductions from every pay, remittances on the CRA’s schedule, and T4 slips by the last day of February after the year.^8,9 This is the point where managed payroll takes the most off an owner’s plate.
• Incorporating. The corporation keeps its own books and files a T2 return for every tax year, even when it owes no tax.¹⁰ Money moving between you and the company has to be recorded as what it is. We prepare and file corporate tax returns from those books.
• A lender or investor asks for financial statements. Statements are only as good as the reconciled books behind them, and some requests need a review or an audit, which only a licensed public accountant can provide. Ask exactly what is wanted.

What can you keep doing yourself?

A lot, if the habits are in place from the start:

• one bank account and one card used only for the business
• a photo or scan of each receipt as it comes in; the CRA accepts an electronic image in place of the paper when it is an accurate copy made to the national standard it points to¹¹
• sales recorded and invoices sent as the work is done, not at month-end
• a calendar holding every filing and payment date the business has

How often each of those needs attention is the subject of our guide to how often to do the bookkeeping.

Owners who already work in QuickBooks, Xero or Sage can find what the software leaves to them, and when doing it themselves stops making sense, in our guide to whether you still need a bookkeeper with accounting software.

What are the signs you need help?

Most of them show up as questions about the business that you cannot answer quickly:

• What did the business make last month, and is it more or less than the month before?
• How much GST/HST, payroll or income tax do you owe right now, and when is it due?
• Which customers have not paid, and for how long?
• Where are the receipts for last quarter’s purchases?

Other signs are about time: deadlines that arrive as surprises, penalties or interest on a late filing, or evenings that go to the books instead of the work that pays. If the books are already months behind, start with our guide to what happens if you fall behind.

What does going without one cost?

Usually money that never shows up as a bill. The CRA points out that without recorded transactions you may forget expenses you could deduct or input tax credits you could claim,¹ and most registrants have a time limit for claiming an input tax credit they missed.⁶

Then there is an audit. If records are incomplete, the CRA’s auditors may have to use other methods to establish income and GST/HST, and claims the records do not support could be disallowed.¹

Against that is the fee itself. Our guide to what a bookkeeper costs in Canada covers how fees are set and what a monthly fee should include.

A bookkeeper, an accountant, or both?

A bookkeeper keeps the records current all year. Tax returns are built from those records and are not reserved for accountants; we prepare and file corporate returns ourselves. A licence matters for assurance work, such as an audit or a review engagement. Our guide to bookkeepers and accountants draws that line in full.

Whoever keeps the books, the CRA lets a business authorize a representative, including a bookkeeper or an accountant, to deal with it on the business’s behalf.¹²

Bookkeeping that grows with the business

Frequently asked questions