5 Accounting Mistakes Tradespeople Often Make

Being a tradesperson isn’t easy. The job comes with early mornings and long days spent managing clients, contractors, companies, and suppliers. The last thing you want to do when you come home is think about managing your accounting on top of everything else.

That is why it’s very common for tradespeople to make these 5 avoidable mistakes when managing their books.

1) Fall Into A GST Trap

When registering for GST many tradespeople choose to pay their GST annually. This is a mistake and can really hurt your cash flow in the following year. Rather than wait for your bookkeeping to give you a massive bill that takes an eternity to pay off switch your payments to quarterly.

 

2) Incorrectly Charging PST

PST isn’t a ‘you’re annoying tax’ that you get to charge your clients when you feel. If you don’t have a valid PST number AND a signed contract stating your client will be paying for the PST you cannot charge PST at all to your clients.

Additionally, according to the BC Government, you can only charge PST in the following circumstances:

  • You sell them goods but you don’t install the goods
  • You sell them goods and install the goods, but the goods don’t become part of a building or land
  • Your customer agrees in writing that you can transfer the tax liability to them. Learn more about this special agreement in Real Property Contractors (PDF).

As a general rule contractors and tradespeople don’t generally charge clients PST. Instead, you pay the PST when you purchase the materials and you factor that cost into the contract.

If you have incorrectly registered for PST you can close your account by sending a Request to Close a Provincial Sales Tax Account form (PDF) to the CRA.

3) Throwing Away Receipts

Throwing away your receipts is like throwing away money! You won’t be able to properly claim your expenses which can increase your tax bill. Additionally, if you get audited by the CRA and you don’t have your receipts you could find yourself in a lot of trouble.

Keep a file folder in your truck/van and put all of your receipts inside as soon as you get them. This will help you a) keep your bookkeeper happy b) ensure you charge your clients for all the materials your purchase c) help you come tax time.

4) Not Collecting Deposits

While it would be great to trust everyone and have them maintain that trust by paying their invoice in full and on time, this doesn’t always happen. Having a client fail to pay a large bill can destroy a small business.   

That is why we always recommend that you have a proper invoicing system in place, collect a deposit upfront from their clients and invoice your clients regularly and not just at the end of the contract. You can apply incremental amounts of the deposit to each invoice up until the final bill to ensure you don’t get screwed. By invoicing each job in portions as you go you can ensure you get paid before continuing with the next phase of work.

 

5) Leaving Your Books To The Last Minute!

Now I know that we are a bookkeeping company so this final note may seem a little biased, but SERIOUSLY DON”T WAIT UNTIL THE END OF THE YEAR…OR LATER! A good bookkeeper is going to be extremely busy at this time of year so there may be a wait to be onboarded or the work may cost extra due to rush fees.

We know that if you are reading this post then you are good at building houses, but not good at paperwork and keeping the CRA happy. The sooner you admit this to yourself the better. Hiring a bookkeeper is money well spent. Not only will you be able to sleep at night knowing that the backend of your business is well taken care of you can also know that when the CRA comes knocking because you are the ‘chosen one’ for a random audit you have nothing to worry about.

Contact us today for an obligation free consultation.

small business bookkeeping, career, quickbooks, career search

How Construction Trades can keep the CRA happy

As a tradesperson, you may think the taxation department is out to get you and to be honest you might be right. Construction is a red flag industry due to the number of small suppliers and short-term workers who do cash jobs. So we can’t stress enough how important it is to declare your income honestly if you want to avoid penalties!

Here are our 4 top Tips on how to ensure you keep the CRA Happy

Create Accurate Invoices

If you want to be able to sleep at night knowing that you have nothing to hide then you need to ensure you are creating accurate invoices for all of your jobs. This way if the CRA comes knocking at your door you have everything you need to prove you aren’t hiding income.

Use a software like Quickbooks Online to create your invoices. This will help you ensure all invoices are accurate and stored in the one place. It will also save you a lot of time and money when bookkeeping.

Sub Vs Employee? Know the Difference

The most costly mistake a lot of construction business make is to pay people who should be categorized as an employee as a sub. A quick test to ensure your sub should not be paid as an employee is to ask yourself these two questions.

Does your sub have their own GST and WCB numbers?

Do they own their own tools and take on other jobs besides yours?

If the answer to both is YES then you can pay them as a sub. If they answer NO then you MUST pay them as an employee.

The government doesn’t like missing out on employment taxes so the penalty for incorrect categorization includes back paying payroll taxes INCLUDING the employee’s portion as well as paying penalties and interest.

Charge GST

GST stands for Goods and Services Tax, not Great Sunny Times. It’s not an optional fun tax…It’s MANDATORY. GST needs to be charged on EVERYTHING you invoice. Yes, you need to charge GST on your materials. At the end of the year, your total GST collected needs to be 5% of your total sales. If it isn’t, the CRA will want to know why and you will be liable for the GST that you should have charged.

Get Help

Managing your bookkeeping on top of managing your business is challenging. Most contractors and construction companies we work with come into the office with plastic bags filled with receipts and invoices so we know how easily this part of the business can fall through the cracks. Knowing your numbers and ensuring you are compliant is an extremely important part of your business and shouldn’t be ignored.  Hire a professional bookkeeper who can keep you on track and make sure you are compliant with all your filings.

If you need help with your bookkeeping contact us today for an obligation free quotation.

5 Ways Retail Stores Can Become More Profitable.

Having a retail store is not easy especially in Vancouver. With increased property taxes hurting small businesses combined with the increase in online shopping, retailers need to stay savvy to survive the challenges they face.

Most people shy away from knowing their numbers but given that we are bookkeepers (aka number nerds) we get a first-hand picture of the numbers and they clearly show what works and what doesn’t work.

Here are our top 5 tips for making your retail store more profitable.

1. Invest In A FANTASTIC POS Machine

We aren’t just saying this because we love numbers. Investing in a great system such as Lightspeed  will allow you to monitor and understand your cost of goods sold (COGS) so you can discover what’s selling and what isn’t selling,

Additionally, you want to pick a good software that links directly to Quickbooks so you can save yourself a time and money when organizing your bookkeeping.

2. Become Focused With Your Advertising

Not everything in your store is going to be popular and sell. By having a strong POS system you can determine what your customers want and what they don’t want. Dedicate more shelf space to your top selling items and discontinue slow-moving inventory. Don’t be afraid to raise the price on your popular items, just make sure you stay competitive while doing so.

This is going to lead to my next point.

3. Limit discounts!

Discounts take from your profits so be smart about what you discount. Social media is filled with people promoting discounts and giveaways. Sometimes they make sense but you need to be strategic about your promotions. Over-promoting discounts and discounting items too regularly can teach people to wait until you have a sale to come in and purchase.

Put a promotions schedule in place and stick to it. Use it to move items that aren’t selling and show customer appreciation for your popular items. Bundling items can also be a good method to provide value without robbing yourself. But unless you are a major retailer or a have money to burn resist storewide sales and not having a strong promotions plan in place.

4. Know Your Numbers

“But mooommmmmmm I hate math” Too bad dear it’s for your own good!!! You NEED to know and understand your fixed vs variable costs so that you can make sure your profit margins are correct and enough to cover the cost of operating your business. Additionally, knowing this numbers will allow you to create a monthly cash flow budget to ensure that you have enough $$ to purchase inventory. It will also allow you to make savvy decisions when it comes to your vendors such as asking for bulk discounts and reducing the number of vendors you have.

If this all seems a bit much then hire a bookkeeper. If you are trying to cut costs then wash your own windows. Don’t skimp out on good bookkeeping and accounting. It could mean the difference between success and failure.  

 

5. Be Smart With Your Employees

Who you hire could make or break you. If you don’t have great staff customers won’t come back. Spend the time finding the right people and then invest in educating them on how to SELL if they don’t already come with the knowledge.

Also, remember that at the end of the day you are the boss and if you don’t run a tight ship everyone is out of a job. So only schedule employees when you need them. Create a schedule that works for you and your store with the top sellers getting the most hours.

Know your store’s conversion rate (how many customers enter the store compared to how many that buy things) then determine how you can improve the numbers. If you determine it’s a staff-related issue then address it immediately.

Running a retail business is never easy. Gone are the days when a storefront was enough and rent was low. Juggling online business as well as your store is challenging but if done well can also be very rewarding and set you up for a bright future.

If you need help understanding your numbers contact us today!

Xtreme-EffeX: Extremely creative and innovative design with impact

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As part of our Client of the Month series, we look at Xtreme-EffeX, top custom ironworks and fabrication biz with swag!

Imagine this: A beautiful four-story staircase with glass landings. You’re at the top floor, awestruck, as you glance down at the transparent tier and see the basement at the bottom of the house.

Xtreme-EffeX,  Custom Design and Fabrication, has been making projects like this a reality for residential and commercial properties in Vancouver and throughout North America since 2007.  In fact, they designed and built the swanky residential glass staircase mentioned in the first paragraph.

The brainchild of Ryan Ramsdale, Owner/ General Manager, who built Xtreme-EffeX out of his garage, has evolved into a flourishing retail and fabrication hub that connects businesses, homeowners and developers to the most cutting-edge design trends and products.

 

 

 

Photo: Ryan Ramsdale admits he does not have too many photos of himself. It is evident that his focus has always been on his family and business.

 

With Xtreme-EffeX inventive design-build process, the in-house design team creates unique, functional and durable products that FIT.

Their motto? “Customize rather than compromise. Because custom fits!”

It’s design with impact. With passion, precision and hands-on approach, it’s high-end work that exceeds expectations, going above and beyond with their out-of-the-box approach to realize your vision no matter how seemingly far-fetched or impossible.

Surely, it is no surprise the 10-year-old business has a five-star presence in the industry with access to the best products and materials on the market and the most skilled fabricators.

Whether it’s your outdoor living space that needs sprucing up or you are looking for a special installation project, or security solutions, Xtreme-EffeX is there to save the day, and make it a lot more awesome!

With no signs of slowing down, you’ve probably seen their eye-grabbing work at upscale restaurants, lottery show homes, and designer retail stores.

As part of our “Client of the Month” series, we caught up with Ramsdale on everything from life as a business owner to advice for new startups:

 

What motivated you to start your own business?

“The experience I gained through the industry and the drive to want to continually create custom products that my team and I can be proud of.”

What do you enjoy most about being a business owner?

“Through hard work, the freedom and ability to create a schedule that benefits me, and especially my family.”

 

What’s your favourite part about the fabrication industry?

“The ability to take raw materials and create functional items, using different processes and practices, to achieve what most people don’t see as possible.”

 

What’s your #1 motivator?

“My #1 motivator would definitely be my family. Working hard and developing a business that allows me the time to be there for and with my family.”

 

Describe your ‘a-ha’ moment

“Being able to confidently rely on my team to carry out the tasks that I would typically feel to be my responsibility. Releasing the control and being pleased with the results.”

 

What’s your vision for the business?

“To have self-sufficient business with a dedicated team of motivated fabricators and designers that consistently exceed the expectations of our customers and clients in every aspect.”

 

What advice do you have for other people who would like to start their own business?

“‘With dedication to your dream, you can spend a few years of your life like most people won’t, so that you can spend the rest of your life like most people can’t.'”

Anonymous quote

 

How do you achieve a work/ life balance?

“With the technology of today, it makes it very difficult to be able to turn work ‘off’. But it’s planning for tomorrow, today, then actually turning work OFF and enjoying what it is that we work so hard for.”

 

Who could benefit from your services?

“Home builders, home owners, architects, developers, or anyone with a design idea or concept that needs to be brought to life through our design/build process.”

 

Find Xtreme-EffeX online here and check out all the neat things they do on the daily to make living and work spaces way cooler!

 

Which type of Homeroom tax filing option is perfect for you?

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Homeroom’s Number Cruncher Allysia is on-the-go mom who treasures her free time. She also enjoys people. Which return is right for her?

Are you an on-the-go gal who prefers to drop-off and go, or do you tab through your daily tasks from wherever you can find a decent Wi-Fi signal and some java?

This month, we’re putting the spotlight on all of Homeroom’s income tax filing options: The Homeroom E-Return, the in-person appointment and drop-offs.

Stay tuned each week for fun and to-the-point posts that will highlight pros and cons of each type of return to help you pick the perfect filing option, and maybe even make you fall in love with tax season.

Whether you’re an online dude or a stay-until-it’s-done chick, we will help you pick the easiest and the most convenient option for you.

Easy, breezy, beautiful CRA online payment option

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“How do I pay the CRA online?”

Even the Canada Revenue Agency (CRA) is in with the online!

Whether you have 2016 taxes owing or  you are a business owner who needs to settle a debt, handle it like a boss and pay the CRA to avoid late fees and any legal trouble.

Here are some ways you can pay the CRA, whether you are an individual or a business:

Online (Recommended)

The CRA prefers to receive electronic payments. It’s fast and easy! You can do it two ways:

  • Make a payment using your financial institution’s online banking services:

    • Sign in to your financial institution’s online banking service (RBC Royal BankTD Canada TrustVancity, etc). Bank with another financial institution? See the complete list of banks that can be used on the My Payment service here.
    • Under “Add a payee,” look for an option such as: CRA (revenue)-current year-tax return. CRA (revenue)-tax amount owing. CRA (revenue)-tax installment.
    • See other available options under “Add a payee” that are not listed above here.
    • Business: Specify payroll, GST, Corporate Tax
    • Account number for personal: SIN number
    • Account number for business: Business number
  • Pay via CRA’s My Payment service:

    •  The amount that you can pay will be restricted by your daily banking limit for online transactions
    • Click on “Start my Payment” here to make an electronic payment.

Offline payment methods:

  • In-person (at the bank): You cannot walk into the bank to pay without the remittance voucher. The CRA does not mail them our anymore to encourage people to take advantage of their speedy, secure online payment option.
    • We can provide all our existing clients with a remittance voucher  for their personal taxes which they need to take to their financial institution to pay.
  • Photocopy an old one that you have, or  call the CRA to request it mailed to you. The process takes more than 10 business days, and that might cause you incur late penalties.
  • Mail a personal cheque: In the memo, indicate account number (SIN for personal or business number for self-employed).  Attach a letter to let CRA know what you are paying.

For information about your account balance and payments, including installments, see My Business Account.

When completing your return, you may calculate a balance owing on line 485Your balance is due no later than April 30, 2017. When a due date falls on a Saturday, a Sunday, or a holiday recognized by the CRA, your payment will be considered on time if the CRA receives it or it is postmarked on the next business day.

Generally, if this amount is $2 or less for 2016, you do not have to make a payment.

If you owe tax for 2016, and you file your 2016 return after the filing due date, the CRA will charge a late-filing penalty.

They start charging compound daily interest on any outstanding balance for 2016 starting May 1, 2017, until you pay it in full.

If you can’t pay the full amount you owe, take action right away and call the CRA arrange a payment plan.

For a full list of payment options, go here.

Get in touch with us if you have any concerns here.

Sole Proprietor: “Do I need to file my business and personal tax returns separately?”

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Running a small business is an eternal learning curve of aha moments. Whether you’re filing an income tax return as a startup or exploring entrepreneurship for down the road, here’s one of the most popular questions that come up every year come tax time.

“Do I need to file two tax returns?”

Every year, many new small business owners who are NOT incorporated ask whether they need to file two tax returns: personal and business.

Before we jump into the answer let’s look at what is classified as business income.

Canada Revenue Agency (CRA) classifies business income as money you earn from the following:

  • Profession
  • Trade
  • Manufacture or
  • The undertaking of any kind, an adventure or concern in the nature of trade, or any other activity you carry on for profit and there is evidence to support that intention.

(So essentially any money you make that doesn’t come with a T4 at the end of the year)

NOTE: This income may be earned from a business you operate yourself as a sole proprietorship (SP) or with someone else as a partnership.

CRA Tip: You have to report all amounts of income that are required for calculating income for tax purposes. If you do not report all your income, you may be subject to a penalty of 10% of the amount of income that you did not report.

I Definitely Have Business Income. Do I Need To File Two Tax Returns?

The short answer is – NO! You just need to file ONE return. But… and there is always a BUT…There is more to the process than a simple personal tax return.

Additional Step

As a sole proprietor (SP), you need to report your business income on your personal tax return (AKA T1 General) by completing and attaching a Form T2125: Statement of Business or Professional Activities (see below).

 

Other Fun Facts You Should Know

While you only need to file ONE tax return, there are some tax benefits to being self-employed that you don’t get as an employed individual:

  1. Deadline
    1. While the deadline for individuals filing their 2017 personal income tax return is April 30, 2018, SPs get until June 15, 2018 to file their taxes. That is, if you or your spouse or common-law partner carried on a business in 2017. However, if you owe tax money that is due on April 30, so it’s best to get in early.
  2. One extra form to complete
    1. All your business tax deductions are reported on Form T2125, Statement of Business or Professional Activities (pictured above).
  3. Business tax deductions
    1. Business expenses: Deduct only the business expenses from business income Eg. Meals, Travel, Equipment, Office Supplies relevant to your business.
    2. Home Office Tax Deductions: In order to deduct expenses, the workspace must either be:
      • the place where the individual principally (more than 50% of the time) performs administration or employment duties,or

      • used on a regular and continuous basis, for meeting customers or other persons in the ordinary course of performing the office or employment duties.

      • You can deduct expenses that are required to run your home office. Eg: Utilities and maintenance costs. If you rent your home, you can deduct a portion of your monthly rent. You can deduct the cost of office expenses (eg: Pencils, stationery, paper clips, stamps, etc). You have to claim the maintenance and repairs related to business use of work space in your home as business-use-of-home expenses. Learn more here.

    1. Private Health Services Plan Premiums: You can deduct the Private Health Services Plan (PHSP) Premiums you pay to insure yourself, your spouse and/or any dependents. Click here for more info.

Can Homeroom Just File For Me?

Of course, individual and business tax returns are our specialty.

Check out our Business Tax Checklist to see what we need to complete your return.

Contact us here if you have any questions or concerns.

Happy 2018 tax season!

Think tax time before you go gaga over Black Friday shopping deals, no matter how fluffy

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If you’re like us at Homeroom, you’re feverishly pulling names for Secret Santa with your workmates, and thinking about snatching all the tantalizing Black Friday shopping deals.

We aren’t saying that those things are not important.  

However, there are a few more things that we recommend you think about before you body-surf your way to the cash counter or Jackie Chan your way through the mad crowds to that magical trinket that’s calling out to you,  to ensure that tax time doesn’t hurt your wallet (or your body) as badly as the holidays can.

Unless you’re  like the shoppers in the photo above, lugging human-sized plush toys through the packed fluorescent store aisles….. because teddy bears are forever-friends that can make everything better, even tax season!

Business Owners

If you are a sole proprietor and corporation owner it is time to start making sure you have everything in place to minimize your tax payable and to ensure a smooth transition into 2017, as December 31st is rapidly approaching.

Large Purchases

You should determine what business purchases you may want to make in the beginning of 2017. Once you have written your list take the time to consider if you can afford to make any of your listed purchases before December 31st.

If you can it will increase the amount you can write-off when completing your 2016 tax return.

Check Your Payroll

Take the time to look through your 2016 payroll liabilities.

Determine if there are any unpaid balances or discrepancies that you can remit/reconcile by Jan 15, 2017 (the date when final liabilities are due for 2016).

Failure to do this could result in your business being charged a penalty to rectify any errors that are found after your T4’s are submitted.

Note: Good bookkeepers will be doing this on your behalf.

Work Out Your Net Income

It is good practice to spend this time of year figuring out a rough estimate of what your net income was for the year.

This will allow you to determine if you have put aside enough savings over the year to pay your income taxes and if you haven’t it will at least buy you enough time to write a letter to Santa begging for money to be left in your Christmas stocking.

Personal taxes are on April 30th and corporate taxes are due March 31st so if Santa doesn’t pull through you still have a chance to save.

We recommend that you complete this task even if you are a salaried employee of your company as it will allow you to determine if you should hold off on paying yourself a bonus or if you should defer any salary payments.

Deferring some payments until January may help you stay in a lower tax bracket or at a minimum defer additional tax payments for another year.

If you need help getting your year end in order Teya our business consultant and tax expert is the lady to help. You can make an appointment by calling us directly on  604 739 9536  or by requesting an appointment through our contact us page.

Case Study: LedgerDocs integrates with QuickBooks Online for smarter data entry

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Imagine wedging a 10-hour bookkeeping project into two hours. That’s the dream, and it’s happening!

Work Smarter, Not Harder

At Homeroom, we are always on the lookout for smarter ways to save our clients time and money (and save paper because we’re hella hot that way!)

Enter LedgerDocs.

We’ve been using the program for around a year and have since had to upgrade our account at least five times to accommodate our growing client base. We currently have 11 active companies on LedgerDocs who’ve chosen to utilize the app to simplify their document management and stay on top of their bookkeeping in real time. It’s truly proven to be the ideal time saving integration for our clients.

This week, we put the magnifying glass on the LedgerDocs app:

The Hitch

  • Lack of automation with posting bills through LedgerDocs app
  • Slow loading issues
  • Page rotation problems

What we did about it

We were frustrated because we were spending too much time and didn’t know what to do, or if anyone would listen to us.

  1. We contacted LedgerDocs and said, “Hey, we got some suggestions on how to make your app better and help us run our business better.”
  2. We got a response we weren’t expecting: LedgerDocs invited us to their office to discuss our suggestions.
  3. Teya, Lady in Charge, went to the meeting.
  4. The LedgerDocs team showed a beta test that executed a major suggestion we really wanted.

The Fix

Teya was blown away that even before the meeting, LedgerDocs implemented one of our suggestions. She had a great experience at the LedgerDocs office and said the team was awesome!

Here is how LedgerDocs listened to its customer (us):

  • Able to manually enter the date numerically as opposed to clicking through the calendar: MM/DD/YY. No dashes needed. Simply, tab through.
  • Program will remember all previous receipt information and the only thing we have to change are the date and amount fields. This saves us 20 clicks per receipt.
  • More manual entry allows us, with our complex tax codes in BC, to post things with 100 per cent accuracy because it’s not Optical Character Recognition (OCR).
  • Rotating receipts before they fully load doesn’t cause the page to freeze (resolved the kill page problem).
  • Option to rename documents by hitting the Enter key.

Wish list for LedgerDocs:

  • Pulling bank/credit card statements automatically (automatic fetching)

Exciting upcoming  LedgerDocs feature: Ability to easily transfer Master Admin if necessary.

LedgerDocs is committed to creating a better user experience and listening to their customers to continuously improve their product.

Great job, LedgerDocs! We’re super happy to have a partnership with you.

 

 

 

 

 

 

 

 

 

Case Study: How Hubdoc saves time by auto-fetching bank statements

Vancouver Bookkeeper(s), Tax Return Service Vancouver, Small Business Bookkeepers in Vancouver, Hubdoc, LedgerDocs, QuickBooks, Intuit Canada, Intuit

This app is frigging auto-awesome!

 

We are always  searching for ways to make our practice more efficient and save our clients’ time. 

Today we are going to share with you a case study we did on the Hubdoc document collection and management app.

We had looked at it more than a year ago. At that time, it was not suitable for our business. Recently, we heard rave reviews from other bookkeepers and Intuit community and decided to reach out to them and see if it would be beneficial to use it.

Can of worms

How do we deal with customers who can’t give us bank and credit card statements regularly?

Clients who can’t provide us with regular statements get far behind and then it’s hard to catch up with many months of bookkeeping to do at once. This is disruptive for our work flow and clients don’t get regular reporting from us.

The silver lining

Hubdoc aromatically fetches all the statements and utility bills (BC Hydro, Fortis BC, etc.) in real time. Just link your accounts for automatic delivery. It uses Optical Character Recognition (OCR) technology to analyze your documents. It imports all your financial documents and exports them into usable data.
See below for a step-by-step process for linking your bank account to get regular statements automatically:

Hubdoc trial sharpened

Hubdoc is a great solution for fetching bank statements. Unfortunately, the OCR technology does not jive with BC’s  unnecessarily complex tax system (GST/ PST/ Liquor Tax/ Hotel Tax..) However, in Ontario or Alberta where only GST/ HST is charged this would be a complete package solution.