RECORDS MANAGEMENT WORKSHOP

for Freelancers and the Self-Employed

KEEPING IT SIMPLE

Your role as records manager is to understand the flows of goods or services and the transactions that are the lifeblood of your business. Documents are generated naturally as part of the activities of your business. These are required to provide context and support to assist technicians and your accountant to make the necessary entries and compile financial statements.

Documents – whether paper or electronic – are also critical as evidence in both tax and financial audits…

Over the last 30 years or so, we have transformed ourselves from a society that ran entirely on paper documents to one that now is mostly digital. The banking sector has fully embraced online technology which has revolutionized workflows in almost every industry.

“In 1985 97% of all payments in Canada were made by cheque. In 2018 that number had declined to 14%. Clearly things are changing at an incredibly rapid pace.” – the Canadian Payments Association

In the rush to automate the accounting function, a great deal more attention needs to be placed on how to manage records – both electronic and paper-based.

The infographic below looks at bookkeeping workflows from 1980… 

Today there is little or no delay after the end of the month before banking transactions are available online.

Nobody needs to drive anywhere. Instead the business owner downloads a year’s worth of bank transactions to a shared folder on his PC that synchronizes with his favourite cloud storage application (GOOGLE DRIVE – iCLOUD – ONEDRIVE, etc.).

The data is already live and in spreadsheet format. The owner adds a “category column” to the spreadsheet and categorizes all of the bank transactions. When he or she is finished, an email is sent to the CPA firm to let them know it’s ready.

Staff at the CPA firm can now access the data and summarize in seconds using a “pivot table” in whichever spreadsheet software they’re familiar with (GOOGLE SHEETS – EXCEL – OPENOFFICE, etc.).

They then post the totals to the client’s working trial balance (or upload to an online accounting package).

Using online banking ensures that transactions are recorded electronically as soon as they hit the bank and can readily be shared in digital form. This corresponds to most of what the bookkeeper did in 1980  when she[1] “wrote up” the transactions in a columnar journal. However businesses still need detailed information about the transactions themselves. It isn’t enough to know how much money was involved and whether it was deposited or withdrawn.

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THE IMPORTANCE OF “DIGITAL”

These days the greater part of monetary transactions start out digitally. Larger businesses invariably use accounting software to generate invoices and cheques. Even smaller companies often prepare invoices using WORD™ or EXCEL™ – which means they were digital at birth.

Small companies still often hand write cheques and the cancelled cheques themselves are only infrequently returned. Thankfully most banks provide digital images of the cheques online. These digital images can be available on request for years, depending on a particular bank’s retention policies. My own bank (CIBC) keeps these images on file for at least 6 years. In August of 2018 I was able to retrieve the image of a personal cheque written in January of 2012 – without incurring bank charges.

If your company is still hand-writing cheques as mine does, simply keep (and use) cheque stubs and convert these into a digital form [see IMAGING OF PAPER DOCUMENTS below]. This will facilitate recordkeeping. Alternatively if you only use cheques infrequently, you can opt to download them from bank as needed.

These digital records provide context to help describe and understand the transactions – something your accountant needs. They also provide evidence in case of a tax audit. Most very small companies won’t require audited financials – but digital records are essential in financial audits.

LEARNING TO SHARE

Your parents probably told you it’s important to share. That goes for digital records too.

According to WORKBC 90% of bookkeepers in the province are women and they are a rapidly aging workforce. Today 67% are over the age of 45 and fully 11% are 65 years old or more.
Once a document is in digital form it can be shared easily. This is true even if you’re merely trying to access it yourself in a place that the document isn’t. I maintain a small condominium outside of Vancouver to accommodate my clients who, by and large work in or around Vancouver.

I routinely access digital records from my condo in Port Coquitlam, my home office on Pender Island (in British Columbia’s Southern Gulf Islands), and at clients’ offices in downtown Vancouver. What’s more I also share them with a widely distributed team which includes a professional engineer on Vancouver Island and a couple of CPAs in the Philippines.

We use a system called CITRIX SHAREFILE which also allows us to provide online access to our clients. However GOOGLE, APPLE and MICROSOFT each have cloud-based storage that is robust, inexpensive and works with mobile devices as well as most popular computer operating systems (WINDOWS – MAC – CHROME).

UNDERSTANDING THE FLOWS IN YOUR BUSINESS

ONLINE BANKING IS THE CENTREPIECE OF YOUR RECORDS MANAGEMENT SYSTEM

If you use banks, credit cards and online services like PayPal, all of the monetary transactions should captured automatically. All the major Canadian banks support online banking. Typically you can download transactions and copies of statements in spreadsheet format (“CSV” or comma separated value).

With only a little bit of thought and effort you can ensure that the monetary value of transactions is captured automatically by your bank.

4 KEY TYPES OF BUSINESS TRANSACTIONS

In Figure 2 [TRANSACTION FLOWS] we looked at the 4 key types of business transactions:

1. Purchasing (of goods or services)
2. People (i.e. payroll)
3. Sales
4. Expenses

WHAT INFORMATION ONLINE BANKING DOESN’T CAPTURE

Every business is different, but almost every business involves each of the 4 key types of transactions described in the previous section. Each of these transactions should result in some form of documentation.

These activities are controlled by you. As the owner manager of a small business, you’ll need to understand what documents to expect and make sure they’re available when you need them.

HOW THIS WORKSHOP WORKS

FIRST: Tell us a little about yourself and your business by filling out the online form [see below]
SECOND: We’ll arrange a quick 30 minute teleconference kick things off (at no charge) – and we’ll give you a little “homework”

LAST: Once you’ve finished your assignment we’ll schedule a teleconference during which we will summarize your data so that it is ready for your year end or month end.

 

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