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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:

  1. It needs to be you principal place of business OR
  2. 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”

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

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Written by Dwania Peele · Categorized: Shalini Dharna · Tagged: accountant, business, business expense, CPA, employees, Entrepreneurs, home based business, interest, maintenance, mortgge, Shalini Dharna, work from home

Jan 19 2015

TIPS TO PAYING OFF YOUR MORTAGE FASTER!

Amina

 

I had a great meeting last week with a prospective client.  They wanted to know how to pay off their 25 year mortgage in 10 years.  It was a huge focus for them, as they wanted to take the money left over after paying off their mortgage and put it towards their retirement savings.  They are both in their 40’s and want to be debt free by their early 50’s.

hour glassThey, like many people did not take savings seriously and so now in their 40’s find themselves with a hefty mortgage and not much in the way of savings.  I assured them that to do so would mean making sacrifices, such as less traveling, which they both love to do and eating at home instead of eating out, which they also love doing.  They assured me they were committed.  Of course there were many more sacrifices they would have to make but these were two of the biggest in their particular scenario.

Paying off your mortgage is the single most important step towards financial independence and a healthy retirement. Owning a principal residence outright gives you the financial freedom to channel money that formerly went to your mortgage into your savings or to pursue lifelong dreams or to invest in real estate, which in my opinion is the thing to do as it provides one with extra cash flow, which is another form of retirement savings.

If paying off your mortgage as quickly as possible is your goal you want to make sure you pay attention to the following tips.

Tip #1. First you want to make sure you have a good credit rating.  You can pull your credit report from Equifax here: (http://www.equifax.com/equifax-credit-score/)

By pulling your own credit bureau, you will be sure that when you speak to your mortgage agent or broker, there won’t be any surprises and if there are, you have already taken care of them.  You want to make sure that there are no “monsters in the closet” and that you are aware of your past credit problems, so that you can be prepared to discuss them with your mortage broker.

A good mortgage broker, will make sure that they explain your past indiscretions to the lender and that it does not impact your ability to qualify. You also want to make sure that you are not behind on payments as these can impact your score. It can make the difference between getting a great interest rate and one that is not that great. This can also impact the amount of interest you are paying on your mortgage.

Tip #2. You should be pulling your credit bureau every six to twelve months before shopping for a mortgage, just to make sure everything is on the up and up and that you are not faced with disappointment when it comes time to shop for that mortgage.

Tip #3. Don’t quit or change jobs just before applying for a mortgage, as that can drastically affect your ability to qualify.  Lenders want to see at least 6 months on the job.

Tip #4. The next step is maximizing your down payment.  The minimum required for most mortgages in Canada is 5% (depending on your credit rating) but by paying at least 20% down upfront, you cut down on your principal and interest payments and also avoid having to pay CMHC fees. Remember CMHC insurance protects your lender and not you in case of default so why incur that extra cost?  Of course it’s not always easy to pay 20% down so what else can you do?

Tip #5. You can be mindful of the amortization period.  Many people confuse amortization with term.  Amortization is the life of your mortgage, while the tem can run from 1-10 years with a fixed-rate or variable-rate interest mortgage.  After each term expires, you renew for another term.  Amortization on the other hand, defines how much interest you will pay over the life of the loan.  For example, you might pay less monthly (Principal + Interest combined) with a longer amortization, but the interest portion will be higher. Amortization can run anywhere from 15 years to 35 years (with at least a 20% downpayment). Interest can be the killer.  It can amount to thousands of dollars over the life of your mortgage.  Imagine what you can do with that extra money?

Tip #6. When it comes time to get that mortgage, don’t just go to your bank.  It is understandable that people want to stay with the same institutions that they regularly bank with or have their credit cards and car loans with but it doesn’t always pay to get your mortgage there.  By speaking to a mortgage agent or broker, you can shop around or more importantly they can shop around on your behalf.   Your mortgage agent will get you the best product and rate that works for you.  They have access to more than 40 lenders with different solutions and products, while the bank only has one – themselves.  Furthermore, the bank will push you to insure your mortgage and just like CMHC, the beneficiary of this insurance is the bank not you.

I remember when my husband and I went to get our first mortgage more than ten years ago – just like most, we went to our bank, thinking that since we had all of our business with them, it would make sense to get our mortgage there.  We were shocked when they offered us a rate that was higher than prime at the time and would not even consider a rate reduction based on our years of patronage.

On the advice of a friend, I called a mortgage agent and he was able to negotiate a great rate that was 2% lower.  It saved us years of mortgage interest and was a less stressful expeience overall.

Tip #7. Furthemore, rate is not the only thing you should be concerned with; you want to know if the mortgage will be compounded monthly or semi-annually.  Again this comes down to how much interest you will be paying – the less often the interest is compounded the better—semi-annual compounding could save you hundreds of dollars or more in interest.

Tip #8. Make sure you understand the difference between the variable rate and the fixed rate products, but more importantly how the penalties could affect you if you were to break the mortgage beforfe the term ends.  A variable rate mortgage will cost you 3 months interest, but a fixed rate mortgage will cost you the IRD, which is the difference between the posted rate and the discounted rate, multiplied by the number of months left on the mortgage.  In some cases it can cost you thousands of dollars in fees.

Tip #9. You want to take advantage of any and all prepayment privileges.  This can also help you pay your mortgage off faster as you can make annual prepayments of 10% to 20%, which goes directly towards the principal.  Not all mortgages allow this option so make sure that your broker factors this in, if this is important to you.

Tip #10. Finally and maybe most importantly, as it also has to do with budgeting and savings, is your payment schedule.  Don’t choose something that you can’t stick to, as it will make your life and that of your budgeting very difficult.  By paying bi-weekly instead of monthly, you put more money towards the principal as you have two extra payments every year.  However, if get paid monthly and you are now paying bi-weekly, you may find yourself stretched too thin.  Ask your broker to run different scenarios for you so you know what you can and cannot afford.  The last thing you want to do is get into a mortgage that you can’t afford.

Paying off your mortgage early will take lots of sacrifice, great budgeting and keeping steadfast to your goal, but if you can follow these tips, the rewards will be aplenty!

To Your Wealth!

Amina

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Written by Dwania Peele · Categorized: Amina Mohamed · Tagged: 25 year mortgage, Amina Mohamed, amortization, broker, Budget, Canada, Canadian Small Business Women, cash flow, client, CMHC, credit, credit breau, credit rating, downpayment, entrepreneur, equifax, financial independence, fixed rate mortgage, fixed-rate, good credit, interest, mortgage, mortgage agent, mortgage broker, principal, retirement savings, savings, small business development, small business owners, variable-rae

Dec 21 2014

Social Strategy SOS

SocialStrategy

In the third post in this series, I discussed why you need to consider your customers as “users” and how you go about creating a User Persona to help you target your Content Strategy to your ideal users. Over the next 3 weeks of this series, we’ll finish fleshing out the remaining pieces of the content strategy puzzle, and this week we’ll tackle what is possibly the most perplexing and time consuming part of your digital business: your Social Media Strategy.

Do I really HAVE to have a social media strategy?

Social strategy is complex: there are so many social networks, and sometimes it feels like there is a new one every day.  How does a business owner know which ones to pay attention to, and which ones to ignore?  Engaging in Social Media can be extremely time consuming with little visible return on investment: It can be difficult to clearly see how a social media strategy can help your business.

But social media can also be a virtual goldmine of new customers.  It can be a way that you can develop a relationship of trust with your customers, engage in customer service activities, and even recruit new employees. Social media is here to stay and it is an essential part of every business owner’s sales, marketing, and business development toolkit.   A smart, targeted social strategy can deliver brand awareness, new customers, and even conversions, but it is important to understand why you’re doing it and what exactly you should do, and this is unique to each and every business.

Conversion has changed – forever.

Think about how your customers convert nowadays.  It used to be that customers would become aware of your brand or product through a limited number of expensive and highly controlled channels: perhaps through a television, radio, or newspaper ad, or perhaps through word of mouth.  Their decision to buy was made primarily at point of purchase, that is, when they saw your product on the shelf in the store: the “first moment of truth”, as it was called in the traditional marketing model.

Google has recently described a new model that very accurately captures the new way consumers become aware of, and make decisions to purchase, products and services today, and they call it the Zero Moment of Truth.  The Zero Moment of Truth is all about digital discovery: the extensive searching, recommendation reading, and consulting with Facebook friends that we now engage in before making a purchasing decision.  For products and services big and small, we rarely convert until we have had at least 7 and sometimes as many as 17 digital “impressions” or touch points with a brand.

ZMOTequation

This Zero Moment of Truth is perhaps the most compelling reason that each and every brand, every business selling every product or service, needs to ensure that when the consumer is engaging in this foraging behaviour, that they are there, building trust and clocking impressions that may lead to conversion.  These impressions come from your business website and your social media activities, especially what people are saying with you and about you in social media.

There may be a small segment of the population that doesn’t use social media, but this is a rapidly shrinking segment.  The fastest growing segment of social users is adults 45-54, and more and more seniors come online every day.  In many ways, Social Media IS the Internet, and the Internet IS Social Media.  It’s difficult today to grow your business without a strategy that covers how, for whom, and how often you will engage your customers in the two-way conversation that Social media has to offer as a marketing tool.

So Many Platforms, So Little Time.

Scheduling tools like Hootsuite make it easy to track and control the frequency of your social media communications, and they make it easy to post the same content simultaneously to multiple social platforms.  But while it may be tempting to try and broadcast your messages to multiple platforms at once, it is rarely a good idea.  In his book “Jab, Jab, Jab, Right Hook”, Gary Vaynerchuck makes a strong argument that business owners should heed: not all social platforms are created equal.  The kind of storytelling that works really well on Facebook for a particular user will not work on Twitter, or Linked, In, or Pinterest, or….

Knowing which platforms to prioritise is perhaps the most difficult part of your social strategy but also the most critical.  You stand to lose a lot of precious time if you prioritise a platform that really doesn’t work for your business, and you can even erode or undermine your brand if you post something clearly inappropriate for that platform: so how does a savvy business owner choose?

There are three factors to consider:

1) What are the various social platforms “good at”?

2) Which of the social platforms do your users tend towards?

2) What is the nature of your business conversion funnel?

1) A Brief Primer on Social Media

There is much crossover between the various major social media platforms: all of them are, of course, social, meaning they are about engaging in a dialogue with others.  But because each one operates in a slightly different way with different rules of engagement, they require different kinds of Storytelling.

Twitter

  • Has over 230 million monthly active users
  • Twitter followers are 60% more likely to recommend you than a Facebook Liker
  • The average age of a Twitter user is much higher than Facebook, at 39 years
  • 70% of Twitter users expect to hear back from a brand, and 53% want that response within the hour
  • Twitter is good for establishing thought leadership, expertise, for sharing news, and for customer service and customer relationship management

Facebook

  • Facebook is the largest social platform in the world: if it were a country it would the third most populated, after only China and India
  • Facebook does have an influence on purchasing behaviour, even if not a direct one. Your Facebook fans are more likely to convert than non-fans.
  • Facebook is great for visibility in social search
  • Facebook is getting into the retail game with Facebook shops if you are selling a product
  • The new killer app on Facebook is the short video

YouTube

  • Has moved from being primarily a video search engine to a powerful social platform where many brands have been born and built. Khan academy, for example, and Justin Bieber.
  • Web videos are a great way to reach out to new and current customers and generate inbound links to your website
  • Because it is owned by Google, embedding YouTube videos on your website gives those pages a double-boost in Search Engine Optimisation

Google Plus

  • Great for local businesses, reviews, and Google search “juice”
  • Ties your business address into a Google Map and ties into other Google services

Linked In

  • The largest professional network, you must have a personal page on LinkedIn; it is far more common to connect with business contacts on LinkedIn than to keep a Rolodex or stack of business cards or emails.
  • Linked in generates 200% more leads than the other social networks

Pinterest

  • The fastest growing as of December 2012
  • Pinterest is very visual, about ‘things’, items they find interesting, but it works even for small businesses that aren’t visually stimulating.
  • Pinterest is good for referral traffic because the source of the pin is a link to your site, especially images you might be posting in your blogs. Even if you don’t maintain a page or presence on Pinterest, installing a “pin it” button on your website pages is a good idea

2) Where Are Your Users Hanging Out?

The short answer is, everywhere.  But you have to narrow that down a little to come up with a feasible strategy.  It’s important to note here that there are multiple social platforms not listed above, many of them attracting niche audiences where you might find a treasure trove of users interested in exactly what you have to offer.  This article outlines 60 niche social networks and it is worth doing a bit of digging to see if any of them resonate with your business goals.  Another tool that you can use is socialmention.com; social mention searches blogs and social networks for topics or brand mentions and can be a good way of finding out where conversations are taking place that align with the kinds of conversations you want to be having with your customers.  And social crawlytics at socialcrawlytics.com can be very insightful, generating a report that will tell you which pages of your website have been shared in social media, where they have been shared, and even by who.

3) What is the Nature of Your Conversion Funnel?

Typically, the more expensive the product or service, the more touch points the consumer will require before purchasing.  What are you selling, and how many touch point’s do you think your customers need before they buy?

Is your product or service more suited to an active discovery process or a passive discovery process?  For example, if I need an emergency plumbing repair I tend to engage in some very active discovery to find one.  I search Google and will probably call the first few service providers I see.  Social Media is better at passive discovery, at marketing products, services, and ideas that consumers don’t need right away or in an emergency.

Do you have a lot of competitors, so will need more touch points or more visibility in the market, or very few competitors?  Are you in the B2B or B2C market?

How much customer service does your product or service require?  And how much brand awareness do you already have in the market?
SocialStrategySOSWorksheetImage

Document the answers to these questions on this worksheet; by indicating on the sliders in the worksheet where your business lands on these various conversion factors will give you some pointers towards which platforms you might want to prioritise as well as the frequency of posting you might want to consider.  Note that the worksheet is more art than science and is intended only as a starting point: they only way to really get good at social media is by doing it, so start small, perhaps with your LinkedIn page, and build slowly using the worksheet as a guide.

The biggest question the Content Strategist has to answer is “Do I need a website AND a Social Strategy”?  The answer is yes, for a myriad of reasons, not the least of which is the findability of your content in Search.  Next month, we’ll cover Search Engine Optimisation and Influencer Marketing, the two biggest ways you can make your website work for your business.

For more resources and information on Content Strategy and to download a detailed description of what content strategy entails, go to analyticalengine.ca/resources or download a Content Strategy Info graphic at http://bit.ly/1qY9tYp.

Christine McGlade is a Business Analyst, Content Strategist, and Usability Consultant.  With over 25 years experience in the media business, Christine helps small business, social enterprise, and Not for Profits how to leverage the power of the Internet to grow their business.  Learn more about Christine at analyticalengine.ca

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Written by Dwania Peele · Categorized: Christine McGlade · Tagged: Analytical Engine, b2b, b2c, business owner, Christine McGlade, Content strategy, conversion, conversion funnel, customers, digital impressions, document, engage, Facebook, faebook, first moment of truth, gary vaynerchuck, goldmine, google, Google Map, impressions, interest, jab, Justin Bieber, Khan, Linkedin, newspaper ad, platforms, product, puzzle, radio, relationship, right hook, Rolodex, SEO, series, service, social media, social media strategy, social network, social networks, Social strategy, sos, television, time-consuming, Twitter, user persona, virtual, website, word of mouth, worksheet, YouTube, zero moment of truth

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