Day: December 7, 2022

When a small business opens its doors the realities of limited budgets often mean trying to do everything in-house. While that approach may work for some areas of the business it is not advisable to adopt this approach with accounting. Owners of a new business should not view hiring of an accountant as a luxury – it should be viewed as a requirement for success. The right accountant can be a wealth of information and experience to assist in structuring processes to ensure that you are getting the most out of every dollar – from day one!

New businesses should consider hiring an experienced and certified accountant as an investment, not an expense. ‘If only I’d come to see you sooner… I would have saved so much time and money!’ is a lament that we have heard often over the past 25 years working with entrepreneurs. There are several problems that can arise quickly and unexpectedly for new businesses, but these can be avoided through knowledgeable guidance by your accountant such as: missing tax breaks, falling behind with invoicing or getting in trouble with the government for tax issues.

Here are the ABC’s of why small businesses need an experienced accountant…

Always set up your books correctly from the start:

The fiscal restraints of being a start up usually begins with business owners having the best intentions of doing their own bookkeeping when they find some spare time. However the reality of the demands of starting a new business leaves very little spare time, or energy, to sit down and focus on bookkeeping. Playing catch up is a common state for business owners. The problem is that the longer it is before capturing the bookkeeping data the more likely there will be data-entry errors, lost documentation (such expense receipts), books that are out of date and a lot of time lost searching for missing items.

An accountant can help you properly set up your books on one of a variety of online accounting software, such as QuickBooks. This software will make it faster for you to send out invoices, record expenses, follow transactions and organize bank statements. Being organized and having all the information at hand will make it much easier to track things like outstanding invoice payment from clients and the taxes your business owes.

Be sure to pay your taxes on time:

Late filing or payment of taxes results in penalties and interest can cost you thousands of dollars! By working with Chartered Professional Accountant (CPA) you will have all your data organized and won’t overlook tax filing deadlines. An experienced accountant will be proactive with your tax files so that your tax filing is smooth and stress-free.

Tax laws are complicated and can change each year. A knowledgeable accountant can often save you money by understanding how to reduce the amount of taxes you must pay. By working with an accountant at the start of your fiscal year and using them for your tax planning services, you will be able to keep more money in your business so you can keep growing!

Cash flow is everything:

This is especially true for smaller businesses. Your invoicing system is critical to the overall strength of your business. When you don’t bill on time, you won’t get paid on time and that’ll leave you short of money – it’ that simple. Unfortunately, it is this factor that undermines a lot of newer businesses.

Let’s just sketch out how this can happen… You do work for a client and send the invoice for that work at the end of the month. Usually businesses give their clients 30 days to pay the invoice. However, the employees that did the work, the resources they used, and your office space expenses will need to be paid for by the end of that month. It’s a delicate cash flow balancing act and if you fall behind in your invoicing or payments by clients then you can find yourself in a very tight spot!

And that’s where the accountant you have hired to help you can make all the difference in the world. With the invoicing system your accountant set up for you you’ll be able to efficiently send invoices and track which ones have been paid. Your accountant can also advise you on things like invoice payment terms and your own office expenses, to help reduce potential areas for cash flow slow downs.

By hiring a good accountant, you are building a strong foundation for your business upon which it can survive and thrive. As we like to say to our clients: It’s good to dream but it’s even better the live your dream!

1) To Ensure You Are Obeying the Current Tax Laws

Tax laws change each year. Some years there can be profound or sweeping changes that can change what and how you report income on your tax return. If your return is filed incorrectly the lament of “I didn’t know I had to do it that way!!!” will fall on deaf ears with the CRA. The Canadian Revenue Agency (CRA) doesn’t accept ignorance of tax law for a defense. So, if you aren’t willing to constantly pay attention, you could miss something important. Protecting your interests by hiring a knowledgeable tax accountant is the best way to ensure that you are paying only what you need to by accessing all available tax benefits and submitting a tax return that will be accepted by CRA.

2) You Owe Back Taxes to the CRA

If you owe any back taxes you really should hire a good tax accountant to help you sort things out. Owing back taxes or being audited by the CRA can be a confusing and frightening experience and it could take months to resolve. Having a good accountant in your corner can lessen the trauma and the time it will take you to get things back on track. Once all is resolved, the accountant can help you to get organized so it doesn’t happen again. Often if you have been audited, CRA will give your tax return file a closer look for a few years. Having an accountant who is familiar with your situation and can speak for you if CRA has questions on future tax returns will save you stress and sleepless nights.

3) Improve Your Credit Rating and Reduce Debt

Sometimes life just gets a little ahead of us and we can find ourselves in debt. Being in debt can also lead to getting a bad credit rating. Just ask anyone who has experienced these situations – they will tell you how much it can impact all areas of your life and how long it really takes to pay off debt or re-establish a good credit rating. A knowledgeable accountant can show you things like how to consolidate debt to make it more manageable, negotiate with creditors and shorten your path back to good financial health.

4) You Are Starting A New Business or Are Self-Employed

If you are self-employed or own your own business, an accountant can help with that too. Hiring an experienced CPA can help you find ways to lower your taxes that you might otherwise miss. There are some big write-offs for the self-employed. Don’t miss out.

If you’re about to start your own business an accountant can help you prepare. With their help, you’ll be able to ensure that all the necessary tax forms are filed correctly and on time.

5) You Own Real Estate or Rentals

Owning several properties is becoming a popular way to grow wealth here in Canada. While this is a great idea, you must ensure that you are also properly managing the revenue and tax side too. You could be losing out on various tax benefits and not maximizing your money. If you own your own home, or own rentals, an accountant can help you manage them. There are some specific tax situations tied to rental properties, and some major benefits. You don’t want to miss out on those.

Your accountant can keep you up-to-date on all new tax laws so that you are submitting all the necessary data and reporting to CRA to ensure that you will not be hit with any penalties come tax time!

6) Saving For Your Kids

If you have kids, you will probably want to contribute money to a RESP (Registered Education Saving Plan) savings account, or even a trust. An accountant can help set all of that up. They have the tools to help you maximize your money as you look toward your family’s future.

7) The Road of Life

Life major events also come with financial issues that will need to be addressed. When you get married, divorced, retire or have children your tax situation changes as well. Your accountant will help you navigate the changes so you are always benefiting and protecting your financial health and security.

So, if you need financial or tax planning advice, accounting, bookkeeping, or tax return services please get in touch. We’d love to help you out. Take a moment and meet the team…

This is a question I have been asked many times by small business owners during my 26 years as a Chartered Professional Accountant. The answer, however, is not a straightforward one. Recent tax law changes have removed some of the benefits but there are still some key advantages that warrant serious consideration for incorporating a small business.

When you incorporate your business, it is considered to be a legal entity that is separate from its shareholders. As a shareholder of a corporation, you will not be personally liable for the debts, obligations or acts of the corporation. It is always wise to seek legal advice before incorporating.

Benefits of Incorporating:

• Limited liability
• Ownership is transferable
• Continuous existence
• Separate legal entity
• Easier to raise capital than it might be with other business structures
• Possible tax advantage as taxes may be lower for an incorporated business

For more details visit the government’s webpage on this topic.

If you do decide to incorporate and you have a lot of value in your sole proprietorship business such as, receivables, inventory and fixed assets, you need to do something that’s called a Section 85 rollover. That’s basically where you take those assets and transfer them into your incorporated business. You can’t simply start an incorporated business and ignore all the assets and issues from your sole proprietor because it doesn’t simply magically disappear in a puff of smoke. You must shift those assets into an incorporated company.

It’s important to follow the proper process while making the shift because you do not want CRA (Canadian Revenue Agency) auditing your transfer protocol. In CRA’s eyes this needs to be tracked on paper as though it was a sale of a company. CRA may interpret any lack in protocol as an intent to evade some taxation issues if you do not properly addressed all of the issues with your sole proprietorship before starting an incorporated company. Be sure you understand the process and follow it to the letter of CRA so that you don’t create unnecessary problems for yourself. Click here to learn more about the process

If you are considering moving your company from a sole proprietor to an incorporated company and are not sure about all of the ins and outs of the proper process please contact us for an appointment to sit down thoroughly review your options and which path is best suited to your company.

Don’t Blur the Line Between Personal and Business Finances

When you open a new business it’s very common for people to grab from one pot of money to top up another. That is not a good habit to start because it sets the stage for a lot of trouble further down the road. Keeping your business and personal finances well defined is imperative if you want to run a successful business AND stay on the good side of the Canadian Revenue Agency!

Whether you are a sole proprietor or incorporated, you must keep a clear division between personal and professional funds. Take a few minutes to watch this video that outlines some basic good habits that you can use in your own business management practices.