Catch-Up Bookkeeping Checklist for Canadian Small Businesses

To catch up on bookkeeping, identify the unfinished periods, gather complete financial records and reconcile the accounts before treating the balances as final. Keep overdue tax filings on a separate list so that a bookkeeping cleanup is not mistaken for a completed return.

Receipts pile up, bank transactions go unreconciled and then a deadline brings everything into focus. You do not need perfectly organized books to begin. A clear picture of what is missing is a useful first step.

Start by identifying the unfinished periods

Find the last month or year that was fully completed and reconciled. List the periods after that, the accounts used and any known missing records. Separately note outstanding income tax, GST/HST and payroll filings, along with CRA letters and deadlines. Preparing records and filing a return are different tasks.

1. Gather statements for every business account

Collect complete bank, credit-card, loan and payment-processor statements for each unfinished period. Include accounts that were closed or rarely used. Screenshots of selected transactions can leave gaps; full statements help establish opening balances, closing balances and the transactions between them.

The CRA’s recordkeeping guidance explains the records businesses need to support their transactions.

2. Collect sales invoices and income records

Gather issued invoices, sales reports, refund records and payment-processor reports. Explain deposits such as owner contributions, loans or transfers between accounts so they are not automatically treated as sales. Bank deposits alone do not provide the full income record; see the CRA’s business-records guidance for sole proprietorships and partnerships.

Here is a simplified example, not a client case: a processor collects $1,000 in customer payments, deducts $100 in refunds and $30 in fees, then deposits $870. Recording only $870 as sales would hide the other activity. Use the sales/transaction report, refund report, fee statement and payout/settlement report to match the deposit. Identify any sales tax separately. Settlement timing, reserves and other adjustments can also create differences.

3. Find receipts, bills and purchase invoices

Match supporting documents to expenses and outstanding bills. If something is missing, request a copy and keep a list of unresolved items rather than guessing.

A card statement may show that money was spent without providing all the information needed for a tax claim. If you claim GST/HST input tax credits, check the CRA’s documentary requirements for input tax credits.

4. Preserve the existing bookkeeping file and closing records

Provide the current bookkeeping file, prior financial statements, opening balances and year-end adjustments where available. Arrange appropriate access rather than sharing a personal password. Before closing a software account, preserve usable exports and supporting records.

Software depends on the business’s needs. Whatever system is used, the records should remain readable and traceable. The CRA’s electronic-records guidance explains the requirements for electronic records and audit trails.

5. Gather GST/HST and payroll records

Include filed returns, working papers, payment confirmations and relevant CRA correspondence. If the business has payroll, include pay-run reports and year-end filing records.

Agree whether the work covers bookkeeping only or also includes preparing or correcting returns. A reconciled bookkeeping file does not mean outstanding returns have been filed. Refer to the CRA’s GST/HST records guidance when gathering supporting documents.

6. Explain owner transactions

Identify personal purchases through business accounts, business expenses paid personally, owner deposits, withdrawals and loans. Note the purpose and supporting documents. For a corporation, do not guess whether an owner payment is salary, a dividend or a shareholder transaction; its treatment needs to be established from the facts.

7. Agree the scope before cleanup begins

A useful catch-up scope identifies the periods and accounts covered, the records still missing, the reports to be prepared and any separate filing or correction work. Confirm who supplies documents, who answers transaction questions and what limitations remain if records cannot be recovered. Agree the work and fees before starting, and discuss a schedule based on the records available.

Keep the books current and retain the records

Once the backlog is addressed, choose a manageable routine for uploading documents and reviewing accounts. Our monthly records checklist covers what to provide regularly; the year-end bookkeeping checklist covers the annual handoff.

The CRA generally requires records to be kept for six years from the end of the last tax year they relate to. For a late-filed income tax return, keep the records for six years from the date the return is filed. Other exceptions require longer retention, including some property and share records kept indefinitely, CRA retention requests and unresolved objections or appeals. Check the CRA’s retention rules and exceptions before destroying records.

Toronto Tax & Accounting Solutions Inc. can help assess the backlog and define a catch-up plan. Our physical office is in Scarborough, with remote service available outside Quebec in English, Urdu and Punjabi. View our bookkeeping services to discuss the records and support you need.

Running a small business? See our small business accounting packages.