accountant Archives - Canadian Small Business Women

Sep 18 2017

ANXIETY IN NUMBERS

Many entrepreneurs don’t take the time to understand their numbers, in fact, most ignore them altogether!! They rely on their bank balance to tell them if they’re doing well or not and just get the bookkeeping done for the sake of taxes. That may work for you, but how are you going to make informed decisions if you live in obliviousness of your numbers? They tell you the story of how your business is doing and can give you great insights into what’s working, and most importantly, what’s not!

Here are some of the top Key Performance Indicators (KPI’s) you should monitor for your business.

Advertising as a Return on Investment (ROI)

We know advertising is necessary for business growth, brand development and awareness, and most importantly sales. But not all advertising channels work the same. In the beginning you may advertising anywhere that will have showcase you, but the key is to track which of these channels actually brings you clients. Try using a different promo code in each channel so that you can track which is working and get rid of the ones that aren’t.

Inventory turnover

If you have a product based company where you buy the inventory upfront to try and resell it, then this KPI is vital for you. Inventory turnover is the number of times inventory is sold over a time period, which can be monthly, quarterly or annually. This will help you track what inventory is moving and what takes longer to sell. Accordingly you can adjust your buying choices and often your marketing choices too.

Accounts Receivable turnover

This one is really important if you have repeat customers. These days many businesses operate on a “pay before you receive” model wherein the customer is paying for the product or service before it is delivered. However, many businesses still have the more traditional model of providing a service and then invoicing for the work completed, thus resulting in a period of time where you are waiting for a customer to pay. By keeping track of AR turnover you can identify whether your companies policy for credit is working as intended or whether you wish to continue to do services for clients who are perpetually late. A good accounting system will also allow you to review an AR aging to see which customer is always past due.

Gross Margin

Again if you are in an inventory based business, you need to be aware of two factors: first you need to factor in the cost of inventory into all your sales and second you need to make sure you have enough of a markup to not only cover your inventory cost but your operating cost. Doing a gross margin analysis combined with a break even analysis will help you figure out if your pricing structure is working for you or not.

Budget to actual

You’d be surprised how many entrepreneurs don’t have a budget, or if they do, they don’t compare their budget to actual numbers. A budget is not set in stone, of course, but knowing how your actual sales/expenses compared to what you were forecasting can tell you a lot about your business initiatives.

Of course the key to doing any of the above is timely and accurate bookkeeping and financial reporting!

“Behind Every Great Business is a Great Accountant”

For more information on how to keep your business tax efficient, or to get a consultation on whether you are making all the right tax choices for your business, contact Dharna CPA. www.dharnacpa.ca. Info@dharnacpa.ca

May 18 2017

Business Use of Home Expenses

Note: This information differs slightly for employees who are required/allowed to work from home.

Many entrepreneurs love the idea of starting a business from home because now they get to claim the home expenses – or rather a portion of them – as a business expense! BUT entrepreneurs beware there are conditions to be met!

You need to meet ONE of the following conditions:

It needs to be you principal place of business OR
You use the space only to earn business income AND you use it regularly and on an ongoing basis to meet your customers, clients or patients.

So what does that mean?

If you always meet clients at a coffee shop, restaurants or their place of business, and never in your home, it can be a challenge to justify why you need to claim a home office. Furthermore, if you are also expensing a secondary office space (meeting rooms, rented office spaces) justifying the need for a home office becomes even harder. Needing a place to keep your computer and files often is not strong enough. However taking calls, doing client work, and using that room for other functions relating to contracting business can be a better justification. Note there is also an implied expectation of a separate room or dedicated work area; using the kitchen table does not cut it.

Once you have determined that your home office you can claim a percent of the following expenses:

Heat
Electricity
Insurance
Maintenance
Mortgage INTEREST
Property taxes
Other expenses (such as water)

It is important to also mention that the amount you deduct cannot be more than your net income; so the expenses relating to the home office cannot create a business loss. So we recommend calculating your net income (Revenue less expenses) for everything else first, then seeing if home expenses make the cut. These expenses can be carried forward with certain conditions.

When you sell your house, there will be what’s called a recapture if you have deducted depreciation on the value of the house so our recommendations is not to do any depreciation relating to your house!

“Behind Every Great Business is a Great Accountant”

Apr 18 2017

The Cost of Hiring an Amateur

Understandably as a business owner there are A LOT of expenses to start and run your business. A common area entrepreneurs try to save a little is by doing their own bookkeeping. However bookkeeping is a vital process for a business and doing this wrong can be financially devastating! If you are going to be a DIYselfer avoid the following mistakes!

Keep track of your personal contributions into the business! The money you invest becomes part of your cost base and one day you will need to know what this cost when you sell the business or die. Keeping track of your personal contributions into the business will also have an immediate tax impact when you want to withdraw money from the business.
Missing eligible deductions! You don’t know what you don’t know and that could result in you missing eligible deductions or not maximizing the expenses you are claiming. So what? That means more taxes paid (or not enough loss recorded!). This is a hard one to learn on your own and some accountants or business development centers do offer courses on exactly this.
Not preparing financial statements! If you are just using an excel spreadsheet and putting your expenses under the right column heading; unfortunately this is not going to be helpful. Yes you have a grand total at the end of the month, and you can use this to make an income statement, but what you are lacking is the ability to make a balance sheet. This will be of greater consequence if you ever need to ask for a bank loan, investors or want to sell the business – they will want to see a complete set of financial statements.
Mixing personal and business finances. If you don’t separate the activities of the business from your personal activities it will be virtually impossible for you to truly understand how your business is doing. Did you spend that money investing back into the business… or did you spend it on personal activities? Plus if everything is combined the CRA then will access everything if they are auditing you. Treat the business – mentally and physically – as a separate entity and keep a proper paper trail of activities between business You and personal You.

These mistakes are by no means the full list of common mistakes. But each of these has a significant tax impact and business impact for you often immediately and in the future.

“Behind Every Great Business is a Great Accountant”

Mar 18 2017

Employee vs. Contractor

In most cases you hire someone to work for you and you put them on payroll. You pay their taxes, CPP, EI and it is a fairly straight forward process. But what if someone comes to you only part of the time, or they are hired for a specific purpose only, how do you handle those individuals? Many of these part-timers or “occasional” workers are being treated as contractors which means they are not going on your payroll, you are not deducting CPP/EI/Income Taxes. Instead, they are invoicing you for their time, maybe even charging you HST (which you get to claim back!), and you treat them like an operating expense vs. salaries and payroll.

So what is the big deal? In the eyes of the CRA it is a huge deal. They lose out on CPP & EI contributions and receive less income taxes too!

So how can employers help make the right choices? Ask the following questions:

How much control does this individual have on their own activities? If you’re dictating what they have to do (i.e. giving them tasks and deliverables and reviewing their work)
Do you provide the tools and equipment (computer, phone, equipment)
Can that individual subcontract the work or hire their own assistants?
How much financial risk is the person taking?
How responsible is the worker for their deliverables?
Is there an opportunity for the worker to profit?
Other factors such as the written contract

All of these individually and combined, as well as the stated intention, is considered in the choice of employee vs contractor.

Let’s take a look at an example:

I need help with my marketing. Person X is great for the job.

Employee à Person X is going to work from my office 2 days a week from 9-3, on my computer, I am purchasing the marketing software, there is no fixed amount of work but they will be told on an on-going basis what we need (e.g. I am telling Person X to write me 5 blogs, 2 Facebook posts with content relating to ABC), I am reviewing that content. Person X is more likely than not an employee and I should put Person X on my payroll.

Contractor à If Person X can choose to work from home OR my office until the work is done, have their own laptop and software, and I am paying them for a package of 5 blogs and 2 Facebook posts, and I approve the final content. Person X could be considered a contractor.

Each scenario needs to be evaluated accordingly. If you are unsure take a look at how similar positions are being treated.

“Behind Every Great Business is a Great Accountant”

Feb 18 2017

Common Mistakes Made by Small Businesses

You have this fabulous idea to start a business, and you go for it…yea! But then the reality sinks in that running a business is so much more than just selling your product and service. There’s HR and Marketing and IT and ugh worst of them all….accounting!

As an accountant I see small business owners making a few critical mistakes all the time. And the result is they either pay too much in taxes, do not have money to pay themselves, or worst of all go out of business. Unfortunately accounting is as important to a small business as any other aspect of running a business; and it has a direct financial impact to your business! Here are some the top mistakes made by small business owners:

Not having a budget

You obviously do not start a business thinking it will fail, but in the beginning there WILL be more expenses than income. Until your brand and client list grows your budget is extremely important to sustain you. There will be tough calls to make but without a clear budget, you won’t know how to spread out your expenses.

Not keeping up-to-date records

A budget is fine as a guide but how do you know if you are sticking to it if you only do your bookkeeping once a year for tax time? At a minimum doing your bookkeeping quarterly (monthly is ideal) allows you to track progress and adjust your path accordingly. By doing your bookkeeping ONLY at tax time means it is often too late to make any informed decisions and corrective action.

If they walk, talk and look like an employee…they are an employee

Employee vs contractor is a huge area of audit with the CRA. Many employers will classify workers as contractors to avoid paying into CPP & EI when in reality they are employees and subject to payroll deductions. There are a few factors to consider when making this difference but a big red flag is control – who controls their work and schedule? A legitimate contractor likely will not be reporting to someone else who is controlling and reviewing their work.

Not recording all the personal contributions (properly)

If you ask most entrepreneurs how much money have they put into their business the answer is usually “a lot”…but when you ask them how much they cannot quantify it. This can have significant tax impacts when both taking money out of the business to pay yourself and when you are looking to sell the business.

“Behind Every Great Business is a Great Accountant”

Dec 07 2016

Confidence = “Business is booming!”

Sheralyn

I had a great conversation with someone recently. It was on the topic of “owning it.” We were each reflecting upon the fact that we operate a business that has more to do with creativity than any “perceived” solid, marketable skill. It’s easy for many of us to identify with what an accountant does or with the services a website designer can offer. For many of us, we also “know what we don’t know.” That is to say, I’m no good with numbers so I KNOW that I need an accountant to help me with that part of my business. But for those of us offering more creative type services, a typical response from many customers is; “I can probably take a stab at that myself,” or “I need to cut costs somewhere so I’ll (insert here – “get my friend to help” or “write my own blogs” or “take my own pictures.”) How is the budding entrepreneur in any of these creative type services supposed to market and sell to the “DIY” audience? By OWNING it! Own your skill set and service and most of all stop apologizing. Be loud and proud about the VALUE ADD that you bring to the table.

When you’re a writer for example, it can be hard to provide quantifiable evidence of your ability to add to a client’s bottom line. Is the increase in customer traffic due to great content or whizbang looking graphics or because the product or service is exceptional? If you’re a photographer, who wants to pay for your services when everyone has an iphone and thinks their shaky video is suitable for posting. The conversation with my fellow entrepreneur sparked an investigation into how creative people tend to sell their services and universally (from my admittedly unscientific research) it would appear that when we undergo the transformation from apologizing for our services to owning our strength and proudly speaking about our value to your business bottom line, that’s when people suddenly realize that YES they need you and YES, they should actually be paying you what your worth.

Owning your work is pretty simple. To “OWN it” means to be:

Out loud. To speak loudly and proudly about what you do and whom you do it for and that your fee is your fee. End of story. Project that you’re worth it and people will pay what you’re worth.

Original. Stand out from the crowd. Differentiate yourself from every one else.

Out in front of people. SPEAKING is important. Grab every chance you get to speak publicly about what you do. Seek out professional groups and opportunities to speak in front of others. Speaking lends credibility to what you do.

Own it also means:

Work hard. It’s true what your Momma told you. You get out what you put in and if you work hard and produce results for your clients word will get around.

Winning Attitude. Project confidence. Tell yourself every day “you’ve got this.” Confidence sells.

Write about what you do. Again, it’s about credibility. If people can see what you’ve had to say online you are positioning yourself as the expert and will be viewed as one.

Finally, own it means to:

Never underestimate your services and never undervalue what you do. You pay a contractor to complete a task in your home, why wouldn’t you expect to be paid for what you do? Content is valuable, artwork draws the eye to the page and a picture sometimes really is “worth a thousand words” so demand a fair rate and be open about what goes into the services you offer and why they cost what they do.

Network like your life depends on it. This doesn’t mean “selling” to folks, rather it simply means get out there and meet people, talk about what you do and treat everyone like a mutual referral source.

Without fail, the entrepreneurs I spoke with all said some variation of the same thing. The moment they stopped “justifying” their service and the price they charged and instead began proudly declaring: “Here is who I am, what I can do for you and the price you should expect to pay,” (in other words owning it) that’s when their business shifted. Change your mindset. Speak with confidence about what you do, project in your voice and actions that you are the “go to” expert and take on any opportunity to speak in front of groups. Then sit back and watch your business grow!

“O.W.N. IT”

Out loud and out front
Original
Work hard
Winning Attitude
Write what you know
Never underestimate
Network!

As Owner and Principal partner of “Writing Right For You” Sheralyn is a Communications Strategist – working together with entrepreneurs to maximize profit through effective use of the written word. Looking for web content that works, blog articles that engage or communications strategies that help you get noticed? Contact Sheralyn today. Sheralyn is also the mother of two children now entering the “terrible and terrific teens” and spends her free time volunteering for several non-profit organizations.

Sheralyn Roman B.A., B.Ed.

Writing Right For You

Communications Strategies that help you GET TO THE POINT!

416-420-9415 Cell/Business

writingrightforyou@gmail.com

Apr 11 2016

6 things to consider before hiring an agency

CHuntly

When you are running a small business, it can feel overwhelming to try to “wear all the hats” to get things done. You have to be the new business development and sales manager, the accountant, product development, HR (even if you’re a solopreneur, you still have to take care of yourself!), marketing director, operations director, etc. You get the picture. It can be overwhelming to stay on top of everything while ensuring your business is growing at a rate you are happy with.

Perhaps you have thought about hiring someone, but you can’t necessarily cover a full monthly salary cost. You could consider an intern, but they may not have the experience necessary to get you to where you need to be. One option you may not have considered is hiring an agency to take care of your marketing efforts.

Maybe you aren’t ready to work with an agency to take your marketing off your to do list, but if you are, here are six things to look for in an agency.

Chemistry: Sometimes you will have the option to “date before getting married” if you have a smaller project you want to work on before signing a longer-term commitment. This isn’t always the case, but either way you want to make sure that you have a good fit with the agency. They should uphold the same business values and ethical standards that you do as they are representing your brand.
Budget transparency: It can be easy to take a “budget” at face value, but make sure you clarify all that is included in the budget. One of the biggest issues to cover is whether you are working on an hourly basis or with a set fee. If you are working hourly, you may be surprised when you get your bill at the end of the month as it might be higher than what was quoted. Negotiating a set fee will ensure you don’t pay for any overages in hours worked.
Nothing is guaranteed: Be wary of any agency that will “guarantee” you specific results such as “We’ll get you TV coverage” or “We’ll guarantee you xx number of media hits” or even “We’ll guarantee you 50,000 followers within the first month.” I have worked with many clients who have been attracted by these guarantees only to find that they are empty. The key is finding an agency who is as invested in your success as they are their own. It should be more like a partnership than two separate entities.
Know what success looks like: Work with your agency to determine how you will know when your campaign has been successful. Every industry has certain metrics they track, and they all mean different things for brands.
Check their track record: A great agency will be able to put you in touch with current and former clients who will sing their praises. At the very least, they should be able to provide you with case studies of clients who have similar goals to your own. Just because an agency has a lot of clients listed on their site doesn’t mean they are the best at what they do.
Know your account team: Don’t be afraid to ask who will be working on your account. It is common in a lot of agencies to sign a contract and then have the interns working on the bulk of the work to create higher profit margins for the agency. If you are concerned about this, just ask. Again, this is your brand, and you deserve to know who will be representing you to your audiences.

Candace Huntly is the Founder and Principal at SongBird Marketing Communications, an award-winning agency working to take organizational and individual brands to the next level. With a passion for all things related to creativity and strategy, she specializes in business intelligence, marketing & branding, content strategy & development, media & influencer relations, and social media. Basically, if you need to put your brand, product, or cause in the public eye, she will find a way to do it, while making the approach unique to you.

Connect with Candace

Facebook/Twitter/LinkedIn/email/Website

Aug 26 2015

Best Practice record keeping

What documents and information should a business provide to its accountant in order to file its business taxes, specifically payroll, HST and income tax?

If you do your bookkeeping yourself, provide a softcopy of your records (eg., Quickbooks or Simply Accounting file)
A copy of all your Bank statements for the year. Note: if you do your own bookkeeping, then ensure you provide a copy of your year-end bank reconciliation
A copy of all your business credit card statements for the year. Note: if you do your own bookkeeping, then ensure you provide a copy of your year-end credit card statement bank reconciliation
Cancelled cheques, cheque stubs and bank deposit book for the year
Copies of all invoices issued
List of Accounts Receivables
List of Bad debts
List of year-end inventory (including the cost)
Invoices for capital assets purchased during the year (eg computers, furniture etc)
Details of assets disposed of during the year (even if you got no money when the asset was disposed of)
Copies of all expense receipts
List of Accounts Payable
Details of all bank loans
List of all payroll payments during the year showing gross amount, withholdings and net amount paid. You should also indicate how paid (cheque, cash or direct deposit)
Your accountant should have access to your CRA account data , so it will n ot be necessary to provide CRA correspondence, unless it is of a non-routine nature, and one which your accountant would not have access to
Mileage log detailing business kilometers driven
Record of any expenses you paid for the business (out of your personal funds)

Tips on recordkeeping

It is very important to have a record keeping system in place from the first day of business operations. It is best practice to consult with your accountant on what records to maintain. The accountant should have readily available, a checklist of record required. This makes the first year of filing much easier, and you are less likely to make mistakes which have to be fixed in later years due to lack of knowledge
After your tax filing deadline, consider filing your income and expense receipts in “tax” folders, as opposed to putting them in categories. If you are audited, then all the data used in the tax return is in one place. You simply pick up the folder, and hand it to the auditor. You can use tabs to separate the docs in the categories on the tax return
Manual record keeping – this can be as simple as an accordion folder where you drop all invoices, expenses, bank statements and other required documents, in the separate sections. Then give this folder to the accountant to summarise and use to prepare taxes.
To reduce accounting bill, you can summarize the receipts for your accountant. This is most applicable to a Sole Proprietor, where the basis of the tax return is your income and expenses, as a full financial statement is not required. However, for a corporation, expense summarization doesn’t help too much, as the basis of your corporate tax return is your Bank statement.
Electronic recordkeeping is strongly suggested for a corporation. Simply because of the details required to be reported, as well, CRA requires a full financial statement – Income Statement and Balance Sheet (which is not required for Sole Proprietors)
Stay on top of your recordkeeping

Green Meikle & Smith Chartered Professional Accountants

Authorized to practice public accounting by the Chartered Professional Accountants of Ontario

1020 Matheson Blvd. E. Unit 10

Mississauga, ON L4W 4J9

905-919-3543 Ext 101

647-338-5306 (cell)

greenmeiklesmith.com

Jul 26 2015

Choosing an accountant

No matter the size of your business, or its cash flow position, a business owner should never be without an accountant.

Accountants ought to provide services beyond the scope of tax preparation. Business owners in our community deserve, and should expect more from their accounting and tax service providers. Your accountant should be

Accessible and open all year round
Someone whom you can trust to offer you sound business advice and guidance (a trusted business advisor)
Someone who can interpret your financial results, and hold a meaningful discussion with you about what the numbers are saying about your business
Someone with whom you have an active relationship with right throughout the year, advising you on how to structure your affairs in a tax efficient way. Not just at tax time, because at that point the relationship is reactive, not pro-active
Someone who can advise you on whether or not the systems and internal controls you have implemented in your business are effective. If not, they should be able to help in the re-design and implementation of suitable controls
Someone who can scrutinize the financial performance of a company that you would like to buy
Able to accurately present your company’s financial performance if you would like to obtain financing or are planning to sell
Able to provide or recommend you to an estate planner (for succession planning)
Transparent in the pricing of their services. That is, you should know exactly (or very close to exactly) what your bill will be for the service being provided. There should be no surprises when you open up the bill from your accountant.
A highly trained professional, preferably one who is licensed to deal with the public. If they are licensed, then they belong to a professional body that regulates them, and ensures that their skills and training are current.
Knowledgeable and up to date on your industry and current accounting/tax issues and trends (up to date on current tax and accounting issues)
Adding value with sound tax planning strategies
Properly represent you with the CRA
Ethical, and a right balance between conservative and aggressive, in respect of tax deductions

Note: When looking for an accountant, you should meet with about 2 or 3 accountants to determine what they have to offer, and if they will be a right fit for your company. While fees are very important, your choice should not be made based on fees, but based on what your accountant will save you I time and money, as well as whether they are a right fit.

If you find the right accountant, he or she should be a priceless resource for your business as it progresses through its various stages (start up to maturity).

Green Meikle & Smith Chartered Professional Accountants

Authorized to practice public accounting by the Chartered Professional Accountants of Ontario

1020 Matheson Blvd. E. Unit 10

Mississauga, ON L4W 4J9

905-919-3543 Ext 101

647-338-5306 (cell)

www.greenmeiklesmith.com

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