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The best bookkeeping systems for startups aren’t the fanciest ones. You need one that keeps every invoice and receipt for six years, tracks sales tax without fuss, and lets you export all your data on the day you outgrow it, whichever tool you pick. We haven’t tested or ranked any product, and we don’t quote prices.
What does the CRA require your bookkeeping to do?
The CRA sets a floor that any system has to meet. Records and supporting documents must be kept for six years from the end of the last tax year they relate to. They belong at your place of business or your residence in Canada, unless the CRA gives written permission otherwise. Electronic records must stay in a readable electronic format for that whole period.
| Rule | What it means for you |
|---|---|
| Keep records six years | Counted from the end of the last tax year they relate to |
| Keep them in Canada | Home or business premises, unless the CRA agrees in writing |
| Electronic records stay readable | A backup you can’t open doesn’t count |
| Register for GST/HST past $30,000 | In a single calendar quarter or the last four quarters in a row |
| Register within 29 days | Counted from the effective date of registration |
That last pair is why a sales-tax feature matters sooner than you’d think. Once you cross $30,000 of taxable sales, you must charge GST/HST from the date of the sale that took you over.
Spreadsheet, software or a bookkeeper?
All three can work. It comes down to volume, and to who’s doing the work.
A spreadsheet is fine while you have a handful of invoices a month, no employees and no sales tax. It falls apart when you need to reconcile a bank account or find a receipt from two years ago.
Cloud accounting software starts to pay off once you invoice regularly, hold a business bank account or register for GST/HST. Look for bank feeds, invoice numbering, receipt capture and a sales tax report you can read. Payroll is a separate step. If you hire, our payroll remittance calculator shows what an employer sends to the CRA.
A bookkeeper makes sense when you’d rather not do it yourself. We couldn’t confirm typical fees, so ask for a written scope and price before you agree to anything.
Questions to ask before you pick a system
- Can it handle the provincial rate where you sell, including HST, or GST plus PST or QST?
- Can you export every transaction to a spreadsheet, so you’re never locked in?
- Does it store receipts as images, and can you open them years from now?
- Where is the data kept, and can you meet the rule about keeping records in Canada?
- Can your accountant log in without you sending files back and forth?
How sales tax shows up in your books
Here’s a concrete case. You invoice a client in Ontario for $10,000. HST at 13% adds $1,300, so the client pays $11,300, as our GST/HST calculator confirms. That $1,300 isn’t your income. It belongs to the CRA, and your books should park it in a tax account.
Now the other side. You buy a laptop for $2,260 with tax included. The HST reverse calculator splits it into $2,000 and $260 of HST. Registered businesses can usually claim that $260 back, and your receipt is the proof. Software that separates the two amounts for you saves an ugly afternoon at filing time.
Mistakes startups make
The first is mixing personal and business money. One shared account turns every month-end into a guessing game. Open a separate account early, before the first client payment lands.
The second is waiting until tax season. Nobody remembers what a $47 charge in March was for. Categorize weekly, even if it takes ten minutes.
Third, forgetting the sales tax threshold. Track your taxable sales every quarter, because you can cross $30,000 in one strong quarter. Not sure what you’ll owe? Use the self-employed tax calculator to size up a year, keeping in mind it leaves out EI.
Where the numbers come from
The record keeping rules and the GST/HST registration limit come from the Canada Revenue Agency’s business pages. The 13% HST rate for Ontario is the rate used in our calculators. We haven’t verified any prices, discounts or feature claims for accounting products, so this page doesn’t make them. Check each vendor’s own page before you sign up.
Frequently asked questions
How long must a Canadian startup keep its records?
Six years from the end of the last tax year they relate to, unless the CRA gives permission to destroy them earlier.
Can I use a spreadsheet for bookkeeping?
Yes, while volume is low. Move to software when you reconcile a bank account, charge sales tax or hire staff.
When must a startup register for GST/HST?
When taxable sales pass $30,000 in a single calendar quarter or over the last four calendar quarters.
Where must records be kept?
At your place of business or residence in Canada, unless the CRA agrees in writing to another place.
What should software do about sales tax?
Keep tax collected and tax paid apart from income and expenses, at the correct provincial rate.
- Self-employed taxes in Canada: income, CPP and GST
How tax works when you are self-employed in Canada: reporting income and expenses, paying both halves of CPP, instalments and when to register for GST
Information only. This page is general information, not tax, legal or accounting advice. Tax-Services.ca is an independent publisher: we don't prepare or file tax returns or offer tax services, and we have no connection with the CRA, Revenu Québec, any government or any company named on this page. Check the figures that matter with an official source or a qualified professional.