If you're looking for an efficient way to track your company's expenses, then this is the right article for you! Accounts payable is an accounting term that refers to money owed by a company or individual to suppliers or others who have done business with them. It may also refer to money owed by the company, business owner, or individuals.

Using an accounts payable aging report can help business owners manage their books. It's a valuable tool for tracking the amount of expenses paid versus owed. And, it helps provide insight into when payments are overdue and the steps needed for them to be paid off in full.

How to use an Accounts payable Aging Report in QuickBooks Online

A QuickBooks Online aging report is like having a money management dashboard in your hand. In the next section, we will show you how to set up the aging report. The aging report allows you to view your Accounts payable balance as of any specific day or date (or range of dates). Using the Aging Summary Report below, helps identify accounts payable amounts over 30 days old for your review.

These are the steps you'll need to take to run an Accounts payable aging report:

1) Left-hand side > click on Reports > In the search bar in the upper right-hand corner, type in "Accounts payable" and select either Accounts payable aging summary or Accounts payable aging detail > in this example, we will be choosing the Accounts payable aging summary

2) On the next page > filter for date. For instance, you can choose either "Today" or a specific date range. With date range selected > click "Run Report" located on the right-hand side.

3) To view the amounts owed > click directly on the vendor names or the dollar amounts. For this example >click on "226" owed to "Jennifer Hargreaves."

If you want to change the filters, you can click on the report's gear icon "Settings" at the top right-hand corner. Doing this will open a new window with additional information on the amount owed. Once you've selected your filters, select "Next" again.

4) The last steps include:
-        Saving or exporting the data that you want to analyze
-        Correcting amounts or applying vendor credits, or payments against the amounts
-        Following up with the vendor, paying the vendor, or agreeing to a payment plan

Related Articles: 8 Tips to Improve Your Bookkeeping & Processes for Accounts Receivables

Frequently Asked Questions

What's the value of running an accounts payable report?

The value of running an accounts payable report is that it provides you with a snapshot of your company's financial performance. The aging process, which we will go over below, will allow you to compare the amount owed versus the amount earned. This provides a baseline for outstanding payments and their percentage of revenue and earnings and will enable you to determine if any trends are developing that may be worth further investigation.

From there, it's an easy step to determine if additional steps are needed for payments to be started or if they are overdue.

Are there any risks with not looking at an accounts payable report regularly?

As an owner, an accounts payable report can help you make better decisions about managing your company. There are circumstances where you might owe money that you usually wouldn't notice because you don't have access to reports tracking this data. It's important to note that this is a risk if you don't have the money to pay off your outstanding balances. This is why it's critical that you understand the value of having an aging report.

For example, an aged accounts payable report might show a series of overdue payments or payments held up. This could be for various reasons, one being the late payment fee. It's helpful to understand what is causing these payments to be late or why they aren't paid off on time to avoid incurring additional fees or penalties on your end. If you're looking for ways to save on your business expenses, this can help you determine where you're losing money and how you can avoid it in the future.

What do I need to know before starting an accounts payable aging process?

You want to make sure you understand what the aging process entails and how it will help your company understand your revenue and expenses.

What do I need to know before starting an accounts payable aging process?

You want to make sure you understand what the aging process entails and how it will help your company understand your revenue and expenses.

How often should I run my accounts payable report?

You must run an accounts payable report regularly to know your outstanding balances. Ideally, you would be running an accounts payable report at least once a month to ensure that you do not have too many outstanding payments or pay too much in interest.

Having this information at your fingertips is critical for your company's finances. Ask yourself these questions about your business:

-        Are there any trends of overdue payments or delayed payments?
-        Are any payments being held up?
-        How much are you paying in interest?
-        If there are unpaid balances, have you considered paying them off early to save money on interest costs?

When you are managing a business, it’s important to stay organized. One example of this is the accounts payable aging report in QuickBooks Online, which will let you view your payables status and the amount that the business owes over various time frames. It simplifies everything into a single document—or spreadsheet, as we would usually call it—that shows you how much money your business owes.

Not sure where to start?

Get in touch with us today. We can help you find the answers to these questions and have the correct information to make intelligent business decisions.

Looking for bookkeeping in Ottawa? Learn more about our services and our team.


If you don't know your accounts receivable process inside and out, it doesn't matter how good a salesperson you are. You can be on top of your game day in and day out, but until you figure out how to manage the process that comes after the sale, and the bookkeeping that goes with it, you're never going to be able to grow.

When it comes to the accounts receivable process, there are a few things that you need to know about to improve your workflow. Those are:

  1. How Long It Takes You To Get Paid
  2. What your payment terms are
  3. How Much Money Is in the Cycle When It Comes To Getting Paid?
How Long It Takes You To Get Paid

When you're trying to improve your accounts receivable process, the first thing you need to look at is how long it takes for invoices to go unpaid once sent out. If you're in constant contact with customers and customers who have previously purchased from you, you probably know that it takes about 30 days or so for them to pay your bill after the fact.

What does this mean for you? When was the last time that your customers paid what they owed? If you haven't checked in on it in a while, stop and do so now. Has it been more than 30 days since they paid? Then you need to adjust how long the process takes. If it's taking longer than 30 days, you need to try and require that they pay earlier in the cycle. If it's taking less than that, you should probably consider a way to speed the process up.

What Your Payment Terms Are

There are many different kinds of payment terms that you can offer your clients. Some require no money upfront, while others require full payment before any work goes out. Whatever payment terms you decide to go with, it should be something that makes sense based on your industry and what your clients are willing to agree to.

What does this mean for you? The payment terms that you offer should be something that your clients are willing to agree to. If they aren't, you need to think about changing the terms until you find something that both of you can agree with. This is one of those things where if you settle, all parties come out unhappy.

How Much Money Is in the Cycle When It Comes To Getting Paid?

If you're wondering how much money should be in various stages of the accounts receivable process, here is a rough outline:

Invoices – No money should be sitting at this stage at any time.

Credit Card Payments – This depends on your credit card processor. Most chargebacks are handled by the merchant, with the processor handling disputes.

Payment Schedules – This is the timeframe in which payments should be due. It's essential to know your customers and their payment schedules so that you can create a timetable for when their payments should be received.

Payments – Once they're received, this is how much money you get. Some companies may only allow for partial payments or require an entire payment to come in before they pay anything out.

What does this mean for you? If you've been paying your company's bills, you should know how much money is sitting in each of these stages. Once you do, you can work on optimizing the bookkeeping process based on this information.

Luckily, there are some tried-and-true ways to improve your bookkeeping process that anyone can implement with some deep thought and some elbow grease.

Here are Elevate by Welch’s 8 tips to help you get started:

1. Determine the optimal collection process for your business

First, figure out what sort of collection process will work best for your company. Do you need to offer customers a series of payment plans? Will it be better to take a more aggressive stance and set firmer deadlines? There are several factors involved in making this decision, but the most important is your customer base. Are they capable of handling a complex AR system, or is it better to keep things simple? The answer will vary by industry, but most businesses find they can remain competitive with straightforward policies and minimal stress on the AR side.

2. Establish a payment due date

Once you've determined how aggressively to pursue the AR process, the next step is to set a payment due date. This can be helpful if you're offering customers an extension since it will help them understand when they should expect to pay off their balance. You may still wish to provide some payment plan or extension in certain situations, but having an official due date in place can help prevent undue stress for all parties involved.

3. Utilize email reminders when necessary

If your customers fail to make payments by the due date, it's time for a gentle reminder via email. You can't be too pushy or hound your customers via email. However, politely asking for payment by a specific date can be effective at getting some customers to pay up on time. Keep in mind that some customers will need more time, but others are perfectly capable of paying up without much hassle.

4. Offer payment plans when necessary

For some customers, establishing a due date isn't enough to get their payments in on time. If you need to offer payment plans on occasion, don't hesitate to make it clear how these plans work and whether there is any penalty involved if the customer doesn't pay off the balance in the allotted amount of time.

5. Evaluate and adjust your collection process as needed

If you find you need to change your AR collection policy or procedure, be sure to evaluate the situation and make necessary adjustments as necessary. For instance, you may find that a more aggressive approach works better than a more laid-back approach if your customers are slow to pay off their balances. Make the changes accordingly and continue trying new strategies until you find one that works best for your company.

6. Assess your operations with regards to AR processes and controls

As part of an overall systems audit, assessing how effective and efficient the account receivables process is within your company is explicitly also beneficial. What are the strengths and weaknesses of this process? What process improvements can you make to improve collections? By looking at these questions objectively, you can use this information to refine your AR process even further.

7. Automate your AR processes where possible

If you have the resources, it can be helpful to automate your AR collection process as much as possible. This is because automation simplifies the collection process considerably, allowing you to collect payments with ease and ensure that all documentation is readily available for auditing purposes if necessary

Check out some automation tools for this like AR Collect or Chaser

8. Give customers an incentive to pay off their balance.

As a final tip, remember that you can also give customers an incentive to pay off their balance as quickly as possible, so long as it doesn't run afoul of the law. You can offer discounts or other perks for specific customers who are willing to pay off their balance within a specified time frame. This will save you money in the long term, and it's likely to appeal to customers looking for a deal.

Over time, you'll find that your AR management strategy becomes more streamlined and efficient with every improvement you make. This leads to greater profitability over time, resulting in overall business success.

Not sure where to start? Get in touch with us today. We can help you find the answers to these questions and more so that you have the right information to make smart business decisions. Want to know more about hiring an Elevate cloud-bookkeeper and how they can help improve your bottom line - check out Anita's piece here.

“Either you run the day or the day runs you" - entrepreneur Jim Rohn. Ling Xue is a bookkeeper, if you hadn't guessed. Although she originally studied food engineering in university, her career has taken a turn. With her CPA designation in hand, she now spends most of her time running the day: Ling's love for numbers help shape her life and motivate her to take on each new challenge. Her analysis skills have helped countless organizations run smoothly and stay in compliance with ever-changing tax laws.

As a cloud-bookkeeper, Ling's focused on eliminating inefficiencies and streamlining processes to improve efficiency. She enjoys solving puzzles and finding new ways to help organizations operate more efficiently.

Let's meet Ling Xue:

#1 - What are some of your favourite books?

The Art of War by Sun Tzu because it's full of lessons on running a business. I have read it several times and pick something different out of it each time.

Journey to the West by Wu Chent’en. It's a book about a Buddhist monk, Xuanzang, who goes on a quest to India and China in search of scriptures. It's great with a lot of interesting cultural information about the time period.

#2 - What do you like about working at Elevate by Welch?

My co-workers and work environment. I'm very comfortable and happy working here.

#3 - What do you enjoy doing when you are not working?

Sewing & drawing. It is relaxing, energizing, and a great way to express my imagination.

I also love travel because it's a great new experience and allows me to learn about different cultures.

#4 - What was your favorite subject in school?

Math. I like problem solving and the feeling of accomplishment when I finish a particularly difficult one.

#5 - What did you want to be when you grew up? 

Film Director. I love movies and I wanted to do that for a living.

#6 - What three words would you use to describe yourself? 

Outgoing, curious, and creative.

#7 - What is something clients have to deal with that you want to fix?

Clients spend too much time on administrative work and are generally not as compliant with tax laws as they could be. There's a lot of information to keep track of and the cloud-bookkeeper solution helps automate many of these tasks to make lives easier.

#8 - How would the bookkeeping profession change if you could see the future? Anything specific?

A lot simpler and more efficient with less time spent on administration. More focus will be placed on the core business functions, which means more time and money can be spent on innovation and new products.

Let's finish it off on a light note:

#9 - Who was your first celebrity crush?

Eddie Peng. I liked his character in the movie, Tomorrow.

#10 - If you were put in charge of a country for a day, what country would you choose?

Disney World! It's not a country, but I'd want to be there right now. I've never been anywhere like it. It's the closest I could get to magic.

#11 - If you could have dinner with anyone in the world, who would it be?

Friends and family.

#12 - If you had a time machine, when would you go back to?

I like this question! I’d probably go to the Ming Dynasty. I love the culture and I think it would be interesting to see what life was like in that era.

#13 - What is your greatest strength?

I think I'm very good at creating, innovating, and helping others.

#14 - And finally, which superpower would you want?

The ability to see the future.

Bookkeepers are the unsung heroes of businesses, yet they are always present and look out for their clients best interests. They look at numbers not with dollar signs attached but with numbers not as just a source of income or profit margin, but as an important way to measure how we live our lives.

Elevate by Welch is committed to providing bookkeeping solutions for businesses throughout Canada.

With these insights into Ling's world, we hope you get a taste of who she is and the enthusiasm she brings to her work.

The best way to get in touch with Ling is emailing her here lxue@welchllp.com

Accounting is the language of business. So, to speak it can open many doors. However, it seems that most people know just enough to get by — but not enough to thrive. To help you better understand the world of accounting, we've compiled this guide to accountants and the various titles they can hold. It's not a clear-cut distinction, but understanding the differences between a Bookkeeper and an Accountant, or even a Controller or CFO, can come in handy when deciding who to hire for what kind of job - or when to outsource. So stick with us! Your understanding of accounting will be much more sound by the time you finish reading this article.

What is a Bookkeeper?

Bookkeepers are responsible for the day-to-day accounting activities of a company. They're the ones who record income and expenses, prepare financial statements, reconcile bank accounts and track receivables and payables.

Should I hire a bookkeeper? Yes, I would. When it comes to deciding what to do about the bookkeeping operations of your company, you should probably consider hiring a bookkeeper and not a person who is simply a skillful accountant.

Our previous post Why You Should Hire a Cloud-based Bookkeeper in 2021 is a great place to start.

What is an Accountant?

Accountants are often more experienced than bookkeepers. They're highly skilled at analyzing financial transactions, performing audits and interpreting tax laws. Accountants also provide more generalized accounting services, such as financial planning, management consulting and payroll management.

Should I hire an accountant? That depends on the size of your company and your accounting needs. As you may have guessed, the bigger your company is, the more complicated your needs and transactions become.

What is a Controller?

Controllers are the financial managers of a company. They oversee bookkeepers and accountants who are directly responsible for financial record-keeping. They also make sure that staff members follow policies and procedures, compile regular reports and generally help run the accounting department. Controllers usually have broad supervisory experience, including experience in accounting or business management. They may have responsibility for multiple departments — finance, sales and marketing, operations, IT or customer service — depending on the size of their organization.

What is a CFO?

The acronym CFO stands for Chief Financial Officer; this person is typically the highest ranking accountant within an organization. CFOs are responsible for preparing the annual budget, communicating with outside investors and determining the company's staffing needs. Like controllers, CFOs are also financial managers. However, their main focus is to provide strategic advice and financial guidance to the CEO and other senior management team members.

What's the bottom line?

We know that running a small business comes with wearing many hats. On a daily basis, businesses around Canada are managing cash flow, trying to plan ahead, and need legal and tax support - and often do not have the in-house resources to hire for that. So they look to outsource. But where to start? What if a company needs help with one or more of the following:

Virtualise the business model
Support International Expansion
Advice on diversification
Assessing impact on supply chain
Business operations
financial management
General business planning
Increase data integrity
Operational decision making

One answer is to hire a Cloud-Bookkeeper - someone who can help grow your business with right-fit solutions, is comfortable with most aspects of a finance role, and who works within the framework of a larger firm which would normally have more resources and fractional (part time) capacity to help better steer your business.

Yes, it is a new and exciting idea. But it's not a new idea at all. In fact, if you think about it from the perspective of a CFO, there are obvious advantages to using hiring an outsourced virtual accountant - namely:

#1 - Avoid the risk of stretched resources resulting in poor service delivery or lost knowledge and expertise.
#2 - Widen your search for the best accountant with the most appropriate experience.
#3 - Target an increasingly mature and professional talent pool, many of whom have international experience.
#4 - Match the skill-set and experience of your business with those of virtual accountants who use cloud software applications to support you in making informed business decisions.

The majority of Canadian companies outsource one or more of their accounting services. In most cases, the extent of outsourcing is determined by your own in-house resources. If you have a full-time accountant on staff, it may be more cost-effective for you to simply outsource bookkeeping activities and focus on your core accounting skills. However, if your company is small and cannot justify hiring a full-time accountant, consider hiring an outsourced virtual accountant.

Not sure where to start? Get in touch with Eric at eliebmann@welchllp.com for a free initial assessment of where you stand and what you need. The good news is that with today's technology and online resources, as well as the virtual outsourced work model, we are seeing a leveling of the playing field between SMBs and large corporations.

Local bookkeepers are typically recommended because of their proximity, as they are in the same city and can come to your office or home for a meeting. That being said, the advent of remote bookkeeping and cloud-based services has made it easier than ever to work with professionals online. For businesses, this means greater security as there is no sensitive information on their local machine.

Have no fear; you can work remotely with the best cloud-bookkeepers online without feeling apprehensive or risk-averse! Here are 9 reasons for working securely online with a professional Elevate cloud-bookkeeper:

#1 - Work remotely with your favorite cloud-bookkeeper

If you're looking for a local bookkeeper, it's worth considering that the distance between you and the bookkeeper may not matter at all. There are bookkeepers that work remotely, and while there may be a few more steps involved, with proper procedures you can work with your favorite bookkeeper without leaving the comfort of your own home or office, and still be more secure than working with someone local.

#2 - Work with a cloud-bookkeeper for peace of mind

There are no secrets safe on your local machine! A cloud-based service means that there is an added layer of security to protect all personal data on the cloud. The data is protected in several ways - encrypted at all times (on every step of the way), expertly managed and backed up daily. You don't have to worry about losing data if your computer is stolen or damaged, because most cloud-bookkeepers will have you covered in a heartbeat.

#3 - Get a remote bookkeeper to work with you as your partner to provide solutions

Some small business owners are extremely overwhelmed with the amount of work they need to get done each day. A local bookkeeping & tax professional can be a great asset but they're typically working with other clients as well, so adding more pressure or stress is certainly not what you want. Instead, find yourself a bookkeeper & tax professional who can support and help you grow your business. A cloud-bookkeeper is different than a bookkeeper near you - they are committed to working with you as a partner, to provide you with all the solutions you need to help your business grow.

#4 - Use a secure online payment system for peace of mind

There are several secure payment gateways that provide a safe and secure way to pay for services. Many small business owners who choose an online bookkeeper usually use such a system, so it's worth checking out if you're getting started, too!

#5 - Keep records in the cloud for digital audit trails back up as well as ease of access from anywhere any time

Digital records are easier to access and maintain while backed up in the cloud. Cloud-bookkeepers provide not only cloud-based bookkeeping, but are also extremely knowledgeable and experienced staff when it comes to being able to quickly assist clients with any issues or needs they may have with digitizing all of their source documents, records, and company & employee files. And for businesses who do not have a full time staff, this serves as an added benefit.

#6 - Select your cloud bookkeeper based on the services they offer

Most cloud-bookkeepers will offer services such as a secure payment gateways, remote access programs, online payroll with dedicated employee portals, advisory services using state-of-the-art reporting tools, as well as support other small business owners in growth through blogs and other resources.

#7 - Create a comprehensive budget that keeps you accountable

A cloud-bookkeeper will provide you with the tools and services you need to be able to create a budget, so you have no reason to not adhere to it. Cloud-based bookkeeping software is extremely easy to use and will keep you organized and in compliance with all of the most up-to-date accounting requirements, giving you a comprehensive record of all income and expenses in real-time.

#8 - Get your bookkeeping online before or after your fiscal year-ends

Bookkeeping software is known for its user-friendliness and simple design, and since it can be accessed from anywhere, even if you begin working with a cloud-bookkeeper right before or after the end of the year you will still be able to take advantage of that.

#9 - Understand the value of outsourcing

Hiring a professional bookkeeper can be intimidating for some small business owners and entrepreneurs, and most business owners do not have the time or budget to bring on a full time bookkeeper. No matter how tired you are of doing your own bookkeeping or how much you think that you can handle it yourself, bookkeeping is not something that should be left to chance. As long as you consider a few of the above points, then starting to work with your cloud-bookkeeper may just be the best decision you ever made.

Whether you are a business owner, partner or board member of a small business, bookkeeping & taxes can be daunting and confusing. You may not know where to begin, or you may be concerned about the details. Fortunately, your cloud-bookkeeper can help by providing tax planning services and/or reviewing your past year's taxes to ensure that you are on the right track. Your bookkeeper will also provide his or her expertise in preparing and filing the necessary tax reports required by all tax authorities. Want real-time data & information? Entrust your business to an Elevate Cloud-Bookkeeper -

"One-on-one personal service, a fresh approach to accounting solutions—no gimmicks, no pressure, just great service and great results. That’s Elevate by Welch", says Sean Duffy, CPA, CMA, and Senior Manager at Elevate by Welch, a cloud-bookkeeping service that supports small business owners with their bookkeeping & tax needs.

“Anita is a fantastic professional to our fast-growing cloud-bookkeeping service,” says Sean Duffy. “She is very professional, knowledgeable and has an eye for detail. I highly recommend Anita as a bookkeeper for any business.”

Anita will be available to assist you with all your accounting needs from an accounting point of view as well as with QuickBooks Online.

Anita and her team of Cloud-Bookkeepers provide many types of services for small business owners including financial planning, taxes and payroll services, sales strategies, as well as cloud-based bookkeeping and cash flow forecasting reports/tools for your business growth.

What is a bank reconciliation?

In a nutshell: the accounting records on your company’s books and the figures on your bank statement should match up, but if they do not then this is what triggers the need for a bank reconciliation. The process of completing a bank reconciliation is important because it helps to identify any errors and mistakes so that they may then be rectified.

There are a number of possible causes for this discrepancy. This could be because fees, interest or charges have not been recorded correctly. It may be due to an error or mistake in the accounting records. This could also be an indication that someone has fraudulently altered the figures on the statement and recorded them as part of your company’s records.

There is no need to worry if managing your accounts is a little tricky. There are many online systems and software packages that make bank reconciliations somewhat simple, but a well-trained accountant that understands the intricacies of accounting should always be used.

The process of completing a bank reconciliation could take up to two hours, but can be completed within half an hour on some occasions. The main things are to make sure that the figures on both statements match and there is nothing unusual or suspicious recorded in the transaction history.

How can I simplify this important bookkeeping step?

There are a couple of ways in which the process can be simplified.

“Always contact your bank immediately if you experience any issues with your statements or any unexpected changes to your accounts” – says Eric Liebmann, CPA, CA. Eric has spent more than 10 years in audit and assurance, frequently helping his clients detect anomalies and inconsistencies – saving them countless headaches and thousands of dollars

Why don’t the balances reconcile? If the balances do not reconcile, you can check through your accounting records to see where the discrepancy is. There could be many reasons why the bank statement does not match up with your accounting records.

It could be that there has been an error in one of the statements or a mistake in recording transactions. If so, then they should both be corrected and revised until they are consistent. You may also need to adjust your accounting records to bring them back into balance.

You should also compare the figures on your accounts to the figures on the original bank statement. This will make sure that nothing has been recorded incorrectly.

How do you complete a bank reconciliation in QuickBooks Online?

QuickBooks Online offers many features that make accounting easier, including the ability to reconcile bank accounts. However, many people do not know how to use this feature. This guide will cover some of the basics about reconciling bank accounts and how to do it.

The first step is ensuring all transactions for the month have been processed either manually or through QuickBooks Online bank feed. Once that is complete, let the fun begin!

#1 - Make sure you have the bank statement for the account you’ll be reconciling at hand

#2 - Top right-hand corner, click on the Gear Icon, under Tools, click on Reconcile / or go to navigation menu on left-hand side and click on Reconcile and select the account you’ll be reconciling

#3 - Verify that the beginning balance matches your bank statement

#4 - Enter the ending balance from your bank statement

#5 - Enter the bank statement’s ending date

#6 - Click the green Start reconciling button

#7 - Check off all transactions that match with your bank statement

#8 - The difference should be $0.00

#9 - Click the green Finish now button in the upper right corner

What if I do not reconcile monthly?

No matter how well-organized your books are, it's important to reconcile at least once a month in order to catch mistakes before they happen or risk losing control of your business.

It's challenging because you have to reconcile some accounts manually. You may be required to use paper and pencils, which is so last century. Reconciling an account can take hours, while every minute counts when it comes to running your business. There are apps for doing bookkeeping, like QuickBooks Online, but they don't replace critical thinking and years of experience that you can get when outsourcing to an accounting firm.

Not sure you are up for it? Want to spend your time better? Get in touch with the team at Elevate – we do this full time and we have helped countless clients save thousands of dollars in mistakes.

Drop me a line here: sduffy@welchllp.com

"How bookkeeping works" is a common question asked by business owners and those who need to understand how accounting works. Double-entry bookkeeping is the most common form of bookkeeping because of the way it tracks money in an organization - and it essentially has remained unchanged for centuries. It is also the simplest form of bookkeeping, making it easier to master. You can start using double-entry bookkeeping as soon as you know what to do with debits and credits.

The early development of accounting dates to ancient Mesopotamia, and is closely related to developments in writing, counting and money and early auditing systems. By the time of the Roman Empire, the government had access to detailed financial information. In the Islamic world, ninth century commercial arithmetic and algebra was further standardized by Al-Khwarrzim.

Double-entry bookkeeping - Luca Pacioli

In the 1400s, Luca Pacioli published Summa, an illustrated guide to bookkeeping with double-entry accounting. This first book on financial accounting is seen as a major turning point in the history of accounting. Pacioli's work influenced merchants and modern accountants for centuries.

“All the creditors must appear in the ledger at the right-hand side, and all the debtors at the left. All entries made in the ledger have to be double entries—that is, if you make one creditor, you must make someone debtor." - Luca Pacioli

Pacioli's time is seen as a period of transition from the medieval economy to one governed by merchants and bankers. In the Middle Ages, Italian merchants had been the most influential group of bankers in Europe. The concept of double-entry bookkeeping is more closely associated with medieval accounting practices than with modern accounting standards. However, Pacioli's Summa was influential in establishing the double-entry method as a standard for financial transactions and for later historians to use as a frame of reference.

The Joint-Stock Company & The Birth of the Limited Liability Entity

Moving on from Pacioli, a history of accounting would not be complete without mention of the advent of the predecessor of the modern corporation: the joint stock company. A joint-stock company is a business that has ownership divided between multiple investors, who each take delivery of a share in the company. The public issues shares so that more people can buy them and thus become shareholders. These shareholders then have a vote on how the company should be run, with different numbers of votes attaching to different sizes of shares owned by an individual shareholder.

Although joint stock companies had existed before 1600 across Europe, it was in England at this time that these businesses began to develop into what we would now recognize as a modern day limited liability entity; where one person could own shares without fear of being responsible for the debts or liabilities of other shareholders if the company failed.

When do we see the birth of modern professional accounting?

The birth of modern professional accounting can be traced back to the middle of the nineteenth century. The period from 1850–1880 was a time of considerable change in both accounting practice and education, where the concepts of specialization and professionalism were introduced.

Today, it’s regulated and standardized by the various international accounting standards that provide exclusive frameworks for internal accounting policies. The strict regulation imposed by these guidelines ensures the reliability and comparability of financial statements worldwide.

2021: To Automate, or Not to Automate?

In 2021, we are often asked "Will bookkeeping be automated". Answer: To some extent it will, and to some extent it will not. Historically, bookkeeping has been done manually, with paper and pencil. The birth of the modern computer has created a demand for accounting software. Accounting software can automate some data entry tasks and help accountants - and their clients - in many ways. In other ways, software is making manual accounting obsolete.

The bookkeeping industry - as has occurred in every recent accounting revolution - will be affected by some aspects of the technology revolution. The theoretical basis of accounting - double-entry bookkeeping - is well established and remains a common thread throughout time. As long as we have written records, double-entry bookkeeping has existed. Relatively new concepts of automated accounting are changing how we think about accounting, and our financial system, which in turn will affect how we go about keeping record of it.

And how would Luca Pacioli feel about the pace of innovation happening right now in cloud-bookkeeping? it is our strong opinion that even if Pacioli had started the modern era of accountancy - in the 21st century - he would be surprised by what is happening today. Cloud-accounting is now a reality, and companies are realizing all the benefits.

Equally, Pacioli would be excited by the advent of automation in bookkeeping. He would have seen the benefits of technology and would have been eager to take advantage of it in an age where bookkeeping was manual. And like the many different approaches to double-entry he has seen, there will be a number of ways that people approach business solutions and record-keeping.

What we can say with confidence though, is that he would have loved the convenience of cloud-bookkeeping, something that should not be underestimated. The benefits of automation and cloud-bookkeeping are clear; they are extremely valuable.

The main takeaway from this article is that how we track money in organizations - whether through double-entry bookkeeping or otherwise - will always change and adapt. The accounting industry is a fast-moving one, and Luca Pacioli would have been surprised by it all. Whether he would have embraced the changes is another matter altogether.

Stay tuned to this series for information on some recent technological changes which are underway. Curious about innovation in accounting? Ask one of our Cloud-Bookkeepers how their careers have evolved over the last few years.

If you would like to learn more about how cloud-based bookkeeping and accounting services can help elevate your business in 2021, contact Chris at cmeyers@welchllp.com

More from the Bookkeeping & Accounting series

Keep an eye out for the paper airplane taking off from the green runway for our next piece in the series.

So, you invested in crypto. By most accounts, you are not alone. And while this is a hot topic, many people still don't fully understand and grasp the consequences of investing in cryptocurrencies. The guides on Reddit and the internet just don't explain everything you need to know. So, we created this easy-to-read guide to help anyone who is either just about to buy their first crypto investment or are looking at diversifying their portfolio.

What's all the buzz about?

Cryptocurrency has become one of the hottest investment options in the last year. Many people are attracted to the exciting potential of this pioneering, decentralized technology. However, there is one major thing holding people back: The Unreliable Income Tax Conundrum.

For tax purposes, crypto is not currency. Crypto is property and a business asset (like stocks). The CRA has issued guidance on how taxpayers should report transactions involving virtual currency. When you buy or sell cryptocurrency, it's taxable just like most property transaction.

Taxes For Cryptocurrencies

Cryptocurrency creators (Bitcoin, Dogecoin) set up these currencies as systems separate from any central bank, central authority, or government influence. However, cryptocurrencies are still considered commodities for the purposes of the Income Tax Act.  In other words, when you receive Dogecoin and use it to purchase goods or services, the CRA considers this as a barter transaction. The CRA requires you to report any earnings or losses from these transactions on your income tax return.

The Key Tax Questions

How do I calculate capital gains or losses?

When you sell a cryptocurrency for more than what you paid, the difference is considered a capital gain. If you sell for less, then this difference is considered a capital loss.

If you are the one who has sold a cryptocurrency for more than what you paid, then you owe taxes on this capital gain. If you are the one who paid less, then this is considered a capital loss. Capital losses are deductible against other capital gains.

What if I bought a cryptocurrency from someone else?

When you buy a cryptocurrency, either directly or indirectly from someone else (for example, on an exchange), then the CRA treats this as a barter transaction. Since the value of the cryptocurrency has increased, any capital gains will be realized on the date you sold it.

If you are the one who bought the cryptocurrency and sold it for more than what you paid, then you owe taxes on this capital gain. If you are the one who paid less, then this is considered a capital loss. Capital losses are not deductible on your tax return like income losses.

What if I trade cryptocurrency for another type of cryptocurrency?

When you trade one cryptocurrency for another type of cryptocurrency, the CRA considers this a barter transaction. Since the value of the cryptocurrency has increased, any capital gains will be realized on the date you sold it.

If you are the one who traded cryptocurrencies for another type of cryptocurrency and sold that one for more than what you paid, then you most likely owe taxes on this capital gain. If you are the one who paid less, then this is considered a capital loss. Capital losses are not deductible on your tax return like income losses.

Let’s look at some examples pulled from the CRA’s Guide for cryptocurrency users and tax professionals:

Let’s move along into other aspects of cryptocurrency.

Crypto mining

Crypto mining is the process of verifying transactions on a blockchain ledger by solving mathematical problems. In this way, a miner creates new cryptocurrency, which is then added to the digital ledger.

To mine cryptocurrencies, you need a powerful processing unit like an ASIC, or Application Specific Integrated Circuits. The processing power that ends up being used for this purpose is called hashing power (commonly expressed in megahashes per second). The faster your computer can compute hashes, the better chance you have of earning more bitcoins or other cryptocurrencies.

When it comes to cryptocurrency mining, it's a good idea to keep your capital loss and income loss separate. Capital losses can be used to offset capital gains, while income losses are deductible against any type of taxable income.

OK. So, what about taxes when earning cryptocurrency?

“The income tax treatment for cryptocurrency miners is different depending on whether their mining activities are a personal activity (a hobby) or a business activity. This is decided case by case. A hobby is generally undertaken for pleasure, entertainment or enjoyment, rather than for business reasons. But if a hobby is pursued in a sufficiently commercial and businesslike way, it can be considered a business activity and will be taxed as such.” - from the CRA’s Guide for cryptocurrency users and tax professionals

Individuals who are income tax residents of Canada are taxed on their worldwide income, including any income earned from cryptocurrency mining. Be aware that due to the large fluctuations in daily activity across trading platforms, tax authorities may take the average of the opening and closing values of the day, and also average values across a number of major exchanges.

What is income tax for business activity and does it apply to my mining operation?

The Income Tax Act describes income as the total of all amounts, monetary or not, that a person receives for any purpose. What this means is that all amounts are subject to income tax, even if there is no cash involved. This applies to cryptocurrency mining.

Since every business activity has to report income and expenses, the first step in determining your tax liability is to determine whether your cryptocurrency mining activity is a business activity or not. Therefore, you need to determine whether:

Your cryptocurrency mining activities are carried out in a sufficiently commercial and businesslike way; and You have acquired the necessary skills and knowledge that would allow you to carry on these activities as a profession or business.

What is the income tax treatment for crypto miners?

The CRA has indicated that cryptocurrency mining is a taxable business for Canadian tax purposes due to the fact that miners generate revenue from the sale of cryptocurrencies.

For additional information on how you can calculate your mining expenses and determine what kind of income tax treatment you should receive, please contact us today.

What about GST/HST?

From the CRA's Guide for cryptocurrency users and tax professionals:

"Where a taxable property or service is exchanged for cryptocurrency, the GST/HST that applies to the property or service is calculated based on the fair market value of the cryptocurrency at the time of the exchange.

If your business accepts cryptocurrency as payment for taxable property or services, the value of the cryptocurrency for GST/HST purposes is calculated based on its fair market value at the time of the transaction.

Keep all records that show how you calculated the fair market value."

For additional information on how you can calculate your GST/HST, please contact us today.

What about bookkeeping?

"If you acquire (by mining or otherwise) or dispose of cryptocurrency, you have to keep records of your cryptocurrency transactions. This also applies to businesses that accept cryptocurrency as payment for goods and services." - from the CRA Guide for cryptocurrency users and tax professionals

From the same CRA guide, please see below:

You should maintain the following records on your cryptocurrency transactions:

If you are a miner, also keep the following records:

To sum up, the CRA expects you to keep track of all your cryptocurrency transactions. Get in touch with us today should any of the above speak to you - or if you just need help with understanding your specific situation. If you would like to learn more about how Elevate by Welch can help with bookkeeping and tax services for cryptocurrency, contact Sean at sduffy@welchllp.com

Disclaimer:

The information contained in this article is for general purposes only. It does not constitute legal or tax advice and is not intended to provide specific answers for any individual situation.

In this series of posts, we will explore core bookkeeping and accounting concepts. Have you ever wondered who invented the double-entry system of bookkeeping? Do you want to know how to keep track of your finances and expenses? How to set up your bookkeeping system? You'll be glad to know that you can learn how in this series.

Where to start?

The first step is always the same: register for a reputable bookkeeping software. Though they vary in price, features, and style, they all provide more or less the same things: they help keep track of your transactions and make managing them easier.

The next step is to start using the software. This requires studying the documentation, spending some time reading blogs about bookkeeping and even typing the transactions you already have committed to memory a couple of times.

Then, your final step is to create your accounting system. Write down all your purchases/sales and all your expenses in a notebook/document where you can always refer back to them, should you need to. This may seem tedious at first but it actually helps save time later on, as knowledge of past transactions develops speed and efficiency. Understanding your system will take time, most bookkeepers say it takes an average of 2–3 months to fully get the hang of it. You may even have to consult one of the experts who have already done all the tedious and labor-intensive work for you: accountants and bookkeepers.

Most importantly, focus on building your knowledge about accounting and keep doing that daily. You can never know enough and you will always need to refresh your memory.

This blog series is written especially with the beginner in mind. It doesn't mean that experts won't find it useful; on the contrary, expert bookkeepers often find it hard to understand why someone would want to take on bookkeeping without first learning a few things about it.

The 5 most important tips for beginners

#1 - Understand the importance of using a bookkeeping software

Many people make the mistake of starting to manage their finances without setting up a functional and organized system which will help them keep track of everything, as well as organize their financial processes. You wouldn't try to build a giant house without blueprints, would you?

#2 - Take your time with it

The idea that bookkeeping can be learned very quickly is quite common. But truth is it takes time and dedication to learn. A good bookkeeper or accountant can be hired to do all the grunt work for you, unless you have a special interest in the subject like many people do.

#3 - Focus on building your knowledge about accounting and keep doing that daily

You can never know enough about bookkeeping and there are always new things to learn, so build an effective learning routine that works for you.

#4 - Don't forget to read other blogs about bookkeeping

They are an excellent source of information and tutorials, as well as a place where you can ask questions about your financial process, which is very useful if you want to improve your skills.

#5 - Not for you?

This may be the most important tip of all: leave it to the pros. Reach out to us and let us know how we can help. Let us focus on your finances so you can focus on what you do best: running a successful business.

After all, we can't do what you do. But we can definitely take care of what you don't want to do or don't have the time for. Bookkeeping and accounting are essential parts of any financial system and as such should be taken seriously.

Never underestimate the importance of bookkeeping in the success of your business, no matter how big or small it is. Build a plan that works for you, keep your focus and go after it.

Stay tuned to this series for information on some recent technological changes which are underway. Curious about innovation in accounting? Ask one of our Cloud-Bookkeepers how their careers have evolved over the last few years.

If you would like to learn more about how cloud-based bookkeeping and accounting services can help elevate your business in 2021, contact Sean at sduffy@elevatebywelchllp.com

More from the Bookkeeping & Accounting series

Keep an eye out for the paper airplane taking off from the green runway for our next piece in the series.

"If you can dream it you can do it." Tom Fitzgerald coined this, not Walt Disney. Accounting & Bookkeeping is not a fairy-tale story. It's a profession that involves numbers that have real-world implications, for me, this is what makes it interesting.

I often think about what inspired that statement. Was it the love of life and family? The hope that we have inside us to be successful no matter what our situation is? Or was it the belief that with hard work anything is possible? Who knows, but Tom Fitzgerald knew what it would take. And so do I.

Let's meet Monica Valbuena:

#1 - What do you enjoy doing when you are not working?

Spending time with my family.

#2 - What was your favorite TV show as a kid?

The TV show Friends.

#3 - What is the best advice you have ever been given?

Always finish what you start.

#4 - How do you like your coffee?

Strong and black.

#5 - What are the values that drive you?

Honesty and professionalism.

#6 - What is something clients have to deal with that you want to fix?

Bookkeeping is a sort of open input system and mistakes are made. Mistakes can affect the entire process and end up costing a company thousands of dollars. It's important to have a process in place that monitors the bookkeeping and accounting processes so they can be started on time and finished on time.

#7 - What do you like about working at Elevate by Welch?

It's very exciting working around numbers, analyzing data, and making sure things are correct. I also get to see people succeed as much as they do. The accounting process is an important part of many business operations, so it’s important to make sure it’s worked well.

#8 - How would the bookkeeping profession change if you could see the future? Anything specific?

I don't know for sure, but I can imagine that bookkeeping would be used more in the financial and medical fields. I think that the number of people working in accounting and bookkeeping should increase as technology changes.

#9 - Do you have any ideas for a business book? Anything that inspired you?

This is a great question. I always try to include the basics of accounting as well as business practices. Everyone moves into their own field, not just accountants. In my story, Monica is a bookkeeper and it is relevant to her work. As for something inspiring, I think there are many stories out there of what makes an individual successful and being passionate about what they do is very important.

#10 - How many years of experience do you have in your profession?

I’ve worked more than 10 years in my career and still love what I do every day. I’m sure there is something else out there that would interest me, but right now, this is where I want to be.

#11 - What's the best thing about your job?

The people I work with are very special. It's a team effort; we all encourage one another to be the best we can be.

Let's finish it off on a light note:

#12 - If you could have one wish, what would it be?

To help others and work on improving the world.

#13 - What is the most important life lesson you have learned?

Follow your dreams. You can do it. Just follow your passion and love what you do, and keep your mind open to new ideas. You never know where they might take you...

#14 - Which was your least favorite pet?

A rabbit.

#15 - Who was your first celebrity crush?

Leo DiCaprio.

#16 - If you could have one wish, what would it be?

To make a difference in the world.

#17 - If you could meet anyone in history, who would you meet?

I’d love to meet Leonardo da Vinci. His work is life-changing and he is truly amazing. He made beautiful things that changed history. Something about him just inspires me.

#18 - And finally, which superpower would you want?

Teleportation as I’d go to a beach in Aruba.

Bookkeepers are the unsung heroes of businesses, yet they are always present and look out for their clients best interests. They look at numbers not with dollar signs attached but with numbers not as just a source of income or profit margin, but as an important way to measure how we live our lives.

Elevate by Welch is committed to providing bookkeeping solutions for businesses throughout Canada.

With these insights into Monica's world, we hope you get a taste of who she is and the enthusiasm she brings to her work. The best way to get in touch with Monica is emailing her here mvalbuena@welchllp.com

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