Accounting Services for Toronto Small Businesses: What’s Included and What You Need

One owner’s “accountant” is a part-timer who tidies up the bank feed on the first Sunday of every month. Another’s is a firm that does payroll, every filing, and a planning session each fall. Finding help isn’t the hard part for a small business. Knowing which services you really need, which you can handle yourself, and what exactly a quote is charging you for: that’s harder.

So let’s take small business accounting services apart, piece by piece. I’ll tell you what each one actually involves, and roughly when you’d start paying for it.

Bookkeeping

Get this wrong and nothing below it works. Bookkeeping is the Sunday-night squint at your Visa statement, ticking lines off against the software; it’s arguing with yourself over whether a Staples receipt counts as supplies or equipment; it’s the sticky note of customers who still haven’t paid for June.

What’s usually included: coding, reconciling, both sides of who-owes-what, and generally a monthly snapshot report.

Who needs it: every business, without exception. The question is just who’s doing it, you or someone you pay. Few transactions and plenty of discipline? DIY can work. When the volume gets heavy, or you notice reconciliations are a month or more behind, paying someone usually earns back its cost in your time and a less painful year-end.

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Payroll

Payroll in Ontario is more than cutting cheques. There’s gross pay to calculate; income tax, CPP and EI to withhold; remittances to get to the CRA on time; T4 slips after the year closes. Add vacation pay, stat holiday pay and workplace insurance, and it’s a real job.

What’s usually included: the calculations, stubs and direct deposits, remitting to the CRA, an ROE whenever someone leaves, and T4s at year-end.

Who needs it: anyone with employees, and that includes incorporated owners paying themselves a salary. Payroll errors draw penalties even when they’re small, which is why it’s often the first thing owners hand off.

GST/HST Filing

The trigger is $30,000 of taxable sales, measured over four consecutive calendar quarters or within one quarter on its own. Pass it and registering for GST/HST isn’t optional. Your invoices start carrying HST, you claim input tax credits on business purchases, and returns go in monthly, quarterly or once a year depending on your filing period.

What’s usually included: filing, reconciling the HST you collected and paid to your general ledger, and advice on which purchases qualify for input tax credits.

Who needs it: registered businesses. HST is one of the CRA’s favourite things to review, so getting input tax credits right matters.

Year-End Financial Statements

After year-end, someone takes a year of bookkeeping and produces proper financial statements. You’ll get an income statement and a balance sheet, and sometimes notes. Most small businesses have these prepared as a compilation engagement. Occasionally a lender, landlord or investor insists on a review engagement instead. That’s more work, and in Ontario it has to be led by a licensed public accountant.

Who needs it: corporations, since the T2 needs financial statement information. Sole proprietors don’t need formal statements for tax, but they’re often handy when you apply for financing.

Tax Returns

Which returns you file comes down to structure:

• Sole proprietors use Form T2125, filed along with their own T1, for business income.
• Corporations get six months from year-end for the T2. If the owners drew salary or dividends, T4 or T5 slips are needed as well.

Lots of owners have the same firm do their personal return too. That way the salary, the dividends and your personal tax plan all get decided together.

Advisory and Planning

Everything above records the past. Advisory is about what you’re about to do. Incorporate this year or wait? Salary or dividends? Is there room in the budget for another hire? What’s the bank going to ask for? Cash-flow forecasts and budgets fall under this heading as well.

Who needs it: any business facing a decision with tax or cash-flow consequences. It doesn’t have to be an ongoing retainer. A handful of well-timed conversations a year is often plenty.

CRA Representation

Got a CRA review letter, a request for documents, or a proposed adjustment? Authorize your accountant through the CRA’s representative system and they can handle it for you. Some firms build routine CRA correspondence into the fee. Others bill for it separately. Find out which before you need it.

Matching Services to Your Stage

• Just starting out: honestly, not much. Decent software set up properly, a routine you won’t abandon by March, and someone to look over that first return.
• Growing, with HST and maybe staff: this is where it adds up. Books that stay current, payroll, the HST returns, then the tax return once the year’s done.
• Incorporated and profitable: nearly the whole menu. Bookkeeping, payroll, HST, year-end statements and the T2, plus a sit-down once a year about owner pay and what to do with surplus cash.
• Seeking financing or selling: a higher level of financial statements, and advisory support.

Shopping around for accounting services for Toronto small businesses, get each provider to spell out exactly which of these pieces their quote covers. Two quotes that both say “small business accounting” can describe very different jobs.

Keeping Costs Under Control

Want to know the single biggest thing on your accounting bill that you control? It’s the state of your records. I’d start with the bank feeds. Then the dull habits nobody brags about, same-day receipt photos and a monthly reconcile, plus one tidy bundle when the accountant asks for paperwork. (A dozen emails over three weeks is how hours pile up.) However the firm prices its work, those habits mean fewer hours on your file.

Look at the services you’re buying once a year, too. Businesses change. Plenty of owners keep paying for something they stopped needing two years ago, or skip a service that would have saved them a headache.

Conclusion

Seen up close, small business accounting splits into seven jobs, namely bookkeeping, payroll, HST, year-end statements, tax returns, advisory and CRA support. You probably don’t need all seven on day one. You’ll likely need more of them every year you grow. Learn the seven and two things happen. You quit paying for the ones you don’t use, and quotes stop looking interchangeable.

Frequently Asked Questions

What accounting services does a small business need?

At a minimum, bookkeeping you can trust and a correct tax return every year. Payroll, HST, financial statements and advice come later, as you grow.

Can I do my own bookkeeping and hire an accountant only at year-end?

Yes, plenty of owners do. It works best if you reconcile monthly, so the accountant isn’t cleaning up a whole year in one go.

Do sole proprietors need financial statements?

Not for tax. But a bank or landlord may ask to see them, so they’re worth having.

Is payroll worth outsourcing for one or two employees?

Usually worth it. The CRA’s remittance deadlines and penalties don’t shrink for a two-person payroll, and handing it off makes costly errors less likely.