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Navigating CRA Audits: Best Practices and Tips for Compliance

Expert providing advice in taxes

The CRA (Canada Revenue Agency) administers tax laws and benefit programs for the Federal Government and several territories and provinces. The auditing process is meant to acquire and maintain public confidence in the integrity and fairness of the tax system. The CRA examines the records and books of a business to confirm whether the company is following tax laws correctly, fulfilling its tax obligations, and receiving the benefits and/or refunds they are entitled. The following are tips and best practices for successfully navigating a CRA audit. 

Tips and Best Practices for Compliance

The following suggestions help speed and smooth the audit process, ensuring compliance.

Provide all requested documents: 

  • Personal records ( bank statements, mortgage documents, credit card statements, etc.)
  • Business records (invoices, ledgers,  journals, bank statements, receipts, rental records, contracts, etc.)
  • Records of people related to your business (spouses, family members, partnerships, corporations, trusts, etc.)
  • Records from your accountant that relate to the tax returns and books of the business

Ensure your books are up-to-date and accurate: 

  • Review  all accounts
  • Keep personal and business expenses separate
  • Reconcile bank balances, ensuring they are free of mistakes 
  • Record  and categorize expenses,
  • Save and organize receipts
  • Backup all data
  • Utilize accounting software, increasing accuracy and easing record-keeping
  • Consider outsourcing accounting tasks

Communicate clearly and openly with auditors: 

Keep the auditors informed. Be polite. Prepare and submit everything that is requested. Request updates periodically. Promote clarity by asking questions. 

Be available:

Be available to answer questions,  to assist, and to gather further information. 

Review all findings: 

Ask for an explanation of any changes made. Go over changes with your Chartered Professional Accountant to deduce if you are in agreement or if you wish to challenge the findings. 

Possible Results of an Audit

There are three possible outcomes of a CRA audit. 

  • The assessment is correct: If the audit determines that your assessment is correct, nothing has to be done. You’ll receive a letter and the audit is closed.
  • You owe more taxes: If the auditor determines an adjustment resulting in more taxes, you’ll pay the balance due. 
  • You receive a refund: If the auditor determines an adjustment resulting in less taxes, you’ll receive a refund.

What if you Disagree with the Assessment?

If you disagree with any part of the assessment, contact the auditor. Provide documents/records to support your position. If the disagreement can’t be resolved, you can appeal.

Filing taxes for a business is a complicated and complex procedure. A  Chartered Professional Accountant ensures your tax return is complete/accurate, you get any deductions you’re entitled to, and the chances of your file being chosen for an audit are minimized. If you are audited, your Chartered Professional Accountant supports you through each step of the process. 

Contact Cook and Company Accountants for all your tax and/or audit needs. Whether you operate a large corporation with many subsidiaries or a sole proprietorship, the Cook and Company team uses our expertise/experience to make tax and/or audit time a breeze. We assist in dealing with the CRA. Contact us for a consultation.

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Mergers and Acquisitions: Key Considerations for Business Growth

Mergers and Acquisitions

Acquisitions and mergers are methods used to expand and build a business. Organizations utilize these techniques to achieve goals and improve their company. There are many things to consider when determining whether merging with or being acquired by another company is the right decision for your corporation. Which is the easier option? Which choice offers more resources/security, and which is best for your shareholders?  

Why do Companies Undertake Mergers and Acquisitions?

There are many reasons why merging with or acquiring a business is a compelling option for corporate restructuring. Companies merge with or acquire another company:

  • To gain a competitive edge
  • To grow a business.
  • To increase proficiency
  • To diversify business processes
  • To vertically integrate
  • To take advantage of tax benefits
  • To cut operational costs
  • To survive a rapidly changing market
  • To acquire new technology and skills 
  • To accelerate growth
  • To acquire knowledge
  • To gain revenue synergies (cross-selling products, supply chain efficiency, improved performance, etc.)
  • To lower labour costs
  • To increase market share
  • To gain access to financial resources

What’s the Difference Between a Merger and an Acquisition?

A merger occurs when two or more businesses voluntarily consolidate to form a new entity, combining forces to create benefits (gain entry into new markets, expand market share, reduce operating costs, widen profit margins, increase revenues, increase operational efficiencies, improve technology, pool resources, decrease competition, etc.). The resulting company generally takes a new name and management is undertaken by employees from both businesses. New shares may be issued and distributed equitably among the shareholders of both companies. Mergers are typically friendly, mutually beneficial restructurings of corporate equals without cash exchange. There are many types of mergers:

  • Horizontal mergers occur when companies merge with competitors.
  • Vertical mergers involve merging with customers or suppliers.
  • Market extension mergers involve companies that provide the same product but operate in separate markets.
  • Product extension mergers occur when companies deal with related products and operate in the same market.

An acquisition occurs when one business buys and takes over another business by purchasing 51% or more of the target company’s stock. Large, financially strong companies typically acquire smaller, weaker entities. The larger company looks for small, fast-growing companies that complement their portfolio, intending to expand quickly and access new technologies. The acquired company ceases to exist. New shares are not issued. The purchasing company need not have consent, they gain complete control, and they decide the terms of the restructuring. Despite this, acquisitions are not always hostile. There are different types of acquisitions:

  • Purchases occur when one company buys another company.
  • Takeovers occur when a company takes over another company and is typically hostile.
  • Equity acquisitions involve acquiring stock shares rather than cash.

What are the Benefits of Mergers and Acquisitions?

  • Economics of scale: Merging with or acquiring another company increases the size of a business, improves access to capital, enhances bargaining power with distributors, and lowers costs. The added resources and/or technology help save money.
  • Economics of scope: Acquisitions and mergers allow businesses to access an increased client/customer base. 
  • Synergies are the value created by the merger/acquisition, and the advantages of two businesses working together (cost synergies, revenue synergies, financial synergies). 
  • Increased opportunity for value generation often occurs due to a purchase price less than fair market value.
  • Improved market share: Higher revenue and/or increased profit from the larger company created is a frequent motive for a merger or acquisition. 
  • Increased ability to compete: A larger company is more competitive, often causing smaller companies to fall away.
  • Improved access to talent: Larger companies generally have access to the best talent. 
  • Decentralized risk: Acquisitions and mergers increase/diversify revenue streams, spreading the risk. If one stream falls, alternative streams may increase or hold.
  • Rapid strategy implementation: Mergers and acquisitions speed product research and development and assist with achieving long-term strategies.  
  • Additional tax benefits are achieved by acquiring a company in a strategic industry or a business located in an area with favourable tax laws.
  • Increased product lines: Mergers and acquisitions allow access to new product lines, providing options and diversifying the company portfolio. 
  • Improved image: The image/reputation of an acquired/merged company often improves or is altered for the better. 

Tips for Effective Mergers and Acquisitions 

Some actions and considerations increase the effectiveness of a merger or acquisition. Following are some tips to ensure success.

  • Undertake due diligence. Evaluate the financial health, strategic fit, and potential risks of the other company.
  • Develop an integration plan to encourage a smooth transition and maximize the benefits.
  • Communicate clearly with stakeholders (investors, employees, customers, etc.), minimizing uncertainty and fostering trust.
  • Consider cultural integration (aligning values, practices, norms, etc.).
  • Monitor and evaluate the progress of the integration, making adjustments when necessary and ensuring the achievement of intended outcomes.

If your company wishes to achieve sustainable growth and drive success, consider a merger or acquisition. Be aware of the considerations and challenges associated with these strategies. Take time and evaluate the risks and advantages.  

Considering a merger or acquisition? Need help with business strategy and/or risk management? Contact the experts at Cook and Company. We provide high-quality business services to a variety of privately-owned and managed companies.

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Understanding Tax Deductions in Canada: A Guide for Small Business Owners

tax deductions canada

Tax season is here! It’s time to collect receipts, organize documents, and prepare to file your business tax form. The CRA offers many tax deductions for small business owners. You may only claim a portion of some, while others are deductible at 100%. What is tax deductible in Canada? Read on to find out!

What is a Tax Deduction?

A business tax deduction, sometimes called a write-off, is an expense that lowers the total amount of tax a business has to pay. It is subtracted from the business’s gross income, helping arrive at the taxable income for that year. Tax deductions include expenses such as equipment purchases, office rent, insurance, and business-related travel. 

What is an Example of a Tax Deduction for a Small Business?

Small businesses qualify for many tax deductions, including but not limited to:

  • Capital cost allowance: If a business purchases items (buildings, computers, vehicles, computer equipment, a franchise), it can depreciate these articles (over time) providing tax benefits for several years.

  • Bad debts are debts that a business is unable to collect. The Canadian Revenue Agency allows a business to claim bad debts, excluding those resulting from a conditional sales agreement or those for a mortgage.

  • Start-up costs are incurred preceding the start of business operations and may be claimed as a business expense.

  • Fees, licenses, and dues: A small business may claim professional service fees, fees for professional licenses, and professional association fees (membership in a commercial or trade association).

  • Use of home expenses: If a business operates from a home, that business may claim a portion of the interest on the home mortgage, home insurance, electricity, and heating costs.

  • Delivery, freight, and express: A business may claim fees for mail services and delivery.
  • Fuel costs: A small business may deduct the cost of fuel (diesel, gasoline, propane) motor oil, and/or lubricants used for business operations. This deduction does not include fuel used in a motor vehicle. 
  • Insurance: A business may deduct business insurance policies (general business liability, business interruption insurance, business property insurance, fire insurance, etc.). Businesses cannot deduct the insurance for motor vehicle or life insurance premiums.  
  • Interest and bank charges: A small business may write off any interest incurred on money borrowed to acquire property for the business and/or for general business purposes, as well as bank charges that are incurred when processing your payments.
  • Maintenance and repairs: Businesses may deduct the cost of materials and labour for maintenance and minor repairs done to property the business uses to earn income.
  • Meals and entertainment:  When an owner/employee of a business attends a conference, convention, or similar event the business may claim up to 50% of the cost for beverages, food, plane tickets, gratuities, and hotel rooms. When a business owner/employee takes a client to a sporting or entertainment event, the business may claim 50% of the cost of entrance fees, tickets, food, cover charges, beverages, gratuities, and room rental for a hospitality suite.
  • Motor vehicle expenses: If a small business incurs expenses through the use of a personal vehicle for business purposes, it may claim those expenses (by keeping an accurate log of use). If a business owns a vehicle/fleet of vehicles, it may claim insurance, fuel, parking, maintenance, and repairs. 
  • Prepaid expenses are expenses paid ahead of time (ie: yearly rent) and may be claimed.

  • Office expenses may be deducted (cost of pens, paper clips, pencils, stationery, and stamps.

  • Other business expenses are expenses incurred to earn income and that are not included on a previous line of the business claim (disability-related modifications, property leasing costs, computer/other equipment leasing costs, allowable reserves, convention expenses, private health services plan premiums, and/or premiums not previously deducted.

  • Property taxes: A business may deduct property taxes incurred for property used in the business (taxes for the land and/or buildings where the business is located).
  • Rent: A small business may deduct rent incurred for property used in the business (rent for the land and/or buildings where the business is located).
  • Salaries, wages, and benefits: Businesses may deduct gross salaries and/or other benefits paid to employees, but not a salary paid to the owner or business partner.
  • Supplies: A business may deduct the cost of items used indirectly to provide goods and/or services (ie: cleaning supplies used by a plumber, drugs and medication used in a veterinary operation, supplies used to manufacture a product, software that is used to supply a service).
  • Telephone and utilities: Small businesses may deduct costs for telephone and utilities ( electricity, gas, oil, water, cable, etc.) if they incur these expenses to earn income.
  • Travel: A business may deduct up to 50% of travel expenses incurred while earning business and professional income (public transportation fares, hotel accommodations, meals, etc.).

  • Cloud Computing Service Provider Fees: Cloud computing (that provides access to business applications and data from anywhere, at any time, on any mobile device) may be claimed as a business expense.

  • Donations: A business can claim donations made to registered Canadian amateur athletic associations, registered charities, registered national arts service organizations,  government bodies, registered Canadian low-cost housing corporations, registered universities, registered municipal or public bodies, certain registered foreign charitable organizations, and the United Nations.

  • Advertising: Small businesses can deduct expenses for promotion and advertising, including amounts paid for promotional gifts and business cards. Businesses may also deduct expenses for advertising on Canadian television, in Canadian newspapers, on Canadian radio stations, and in digital or online advertising.

If You Are Unsure

Tax deductions in Canada are constantly changing. If you’re in doubt about the tax deduction potential of a particular business expense, check with your accountant and/or with the CRA. No matter what size your business is, what type of business you operate, or where you operate from, your accountant can ensure you receive the deductions you qualify for. Let your chartered professional accountant help you reduce your business’s tax burden.

Contact Cook and Company Accountants for all your tax needs. Whether you operate a sole proprietorship or a large corporation, Cook and Company will use our expertise and experience to simplify tax time. Contact us to request a consultation.

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Payroll Management 101: What Every Business Owner Needs to Know

payroll 101

Payroll management is time-consuming, complicated, and stressful, but it’s a critical part of running a business and must be completed in compliance with Canada’s payroll rules and guidelines. Mistakes may cause legal/financial trouble with employees and/or the CRA. Understanding what is involved and how payroll works ensures you safeguard your employees and company. The following is a payroll 101 guide; everything you need to know as a business owner. 

What is Payroll?

Payroll is the procedure for providing company employees with wages/salary. It involves tracking hours worked, calculating pay (wages/salary, taxable benefits, allowances, etc.), withholding, remitting, and reporting source deductions (CPP, EI, income tax, RRSPs, etc.), and distributing payment (direct deposit, cheque, cash, etc.). A good payroll system gets the right amount to each person at the right time. Though it may be completed by hand, payroll is typically accomplished through payroll software or outsourced to a third party (accountant, bookkeeper, payroll specialist).  

How to Set Up and Process Payroll

When setting up and completing payroll for your business, you need to:  

What is a Payroll Account?

An employer, trustee, or payer of employees is given a 15-character payroll account number (contains a 9-digit business number, two-letter code, and four-digit reference number) to identify the business when communicating/dealing with the Canadian Revenue Agency. 

What is a T4 Slip?

A T4  slip is a statement of remuneration paid and reports employees’ pensionable, taxable, and insurable income, EI premiums, CPP contributions, and employment income (including allowances and taxable benefits).

What is a TD1 form?

A TD1 form, also called a personal tax credit return, provides information regarding an employee’s tax situation, enabling the employer to deduct the correct amount of tax from his/her pay. It is completed when:

  • A new employee starts work
  • An employee alters/modifies the amounts of claims and/or income
  • An employee wishes to increase the amount of taxes deducted at the source
  • An employee wishes to claim deductions for living in a particular area
  • An employee is beginning to receive a pension

How to Register for a Worker’s Compensation Account

Workers’ compensation insurance provides employees with the benefits and/or services needed to get back to work safely after an injury occurs. If your business is required to have workers’ compensation coverage, you need to open an account within 15 days of hiring your first employee. 

What Happens if You Fail to Deduct the Correct Amounts? 

If you fail to deduct the correct amounts and/or miss the remittance deadline, you are subject to up to a 10 percent penalty of what should have been remitted and/or deducted. If you are found guilty of gross negligence, the penalty could rise to 20 percent of what should have been deducted/remitted. 

Payroll remittance errors cause employers problems and lead to penalties from the CRA (fines, interest, and other fees). It pays to establish a clear, accurate payroll system through the use of CRA-compliant software or the services of a payroll specialist (bookkeeper, accountant, etc.).

Need help with corporate accounting and/or tax planning? Contact Cook and Company Accountants. Whether you manage a sizable corporation or a sole proprietorship, our experience/expertise can make tax time a breeze. Contact us for a complimentary consultation. 

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Audit Planning: Tips for a Successful Audit

tips for a successful audit

Your business file is chosen for an audit by the Canadian Revenue Agency. What does this mean? What happens next? How can you ensure a successful audit?  Read on to find answers.

What is a Tax Audit?

A tax audit is a detailed examination of a company’s records and books by the Canadian Revenue Agency (CRA). It’s intended to confirm that your records/books support your tax return. Audits ensure that the Canadian tax system is fair for all.

How is a Business Chosen for Audit?

11,328 small and medium-sized business audits occurred in 2020/2021. Files are chosen for audit based on a risk assessment; factors such as non-compliance with tax obligations, frequency of errors on tax returns, and comparison to similar files. If your company’s file is identified as high risk, a CRA officer reviews your information to determine whether the CRA should go forward with an audit.

What Issues Prompt an Audit?

The CRA may consider an audit due to any/all of the following:

  • Multiple or repeated errors on your tax returns
  • Expenses not in line with others in your industry
  • Major changes in income or expenses
  • Repeated losses
  • Overly large charitable donations
  • Under-reported earnings
  • Discrepancies between GST returns and Tax returns
  • Unsubstantiated home office deductions
  • Missing information
  • Shareholder loans that should be considered income
  • A lifestyle incongruent with your declared income
  • Real estate transactions
  • Vehicle expenses
  • Audit of a related party
  • Informant tips

What Happens During an Audit?

A CRA auditor contacts your company via mail or phone and sets a date, location, and time for the audit. A review is held at your business location, accountant’s/representative’s office, or a Canadian Revenue Agency office. Your company is given the CRA agent’s contact information and informed of the scope of the upcoming audit. You’re asked to provide supporting documents for the review. The auditor copies your records/books and/or borrows your documents. The agent discusses any questions and addresses any concerns that arise during the audit.

Tips for a Successful Audit

The following suggestions help smooth the audit process.

  • Provide all documents requested: This may include:
    • Business records (ledgers, invoices, bank statements, receipts,  journals, contracts, rental records)
    • Personal records (mortgage documents, bank statements, credit card statements)
    • Records of individuals related to the business (family members, spouses, corporations, partnerships, trusts)
    • Records from your accountant that relate to the books and tax returns of your company
  • Ensure books are accurate: 
    • Reconcile bank balances to ensure no mistakes have been made 
    • Review accounts  
    • Record every expense, categorizing expenses alongside cash flow tracking
    • Save and organize your receipts
    • Keep business and personal expenses separate
    • Backup your data
    • Use accounting software to increase accuracy and ease record-keeping
    • Consider outsourcing your accounting

  • Communicate with auditors: Keep auditors informed. Be courteous. Prep everything requested. Periodically request updates on the procedure. Ask questions for clarity.
  • Make yourself available to assist, to answer questions, and to gather further information. 
  • Review the findings: Ask for an explanation of any changes. Go over these changes with your Chartered Professional Accountant. Decide if you are in agreement or whether you wish to challenge the findings. 
  • Challenge the findings: If you disagree with the assessment, contact the auditor and explain your concerns. Provide documents to support your position. If you are unable to resolve the disagreement, you may appeal.

Filing taxes for a business is a complex and complicated procedure. A  Chartered Professional Accountant ensures your tax return is accurate/complete, you receive the deductions you’re entitled to, and the chances of your file being chosen for an audit are minimal.

Contact Cook and Company Accountants for all your tax needs. Whether you operate a sizable corporation with multiple subsidiaries or a sole proprietorship, we use our experience/expertise to make tax time a breeze. In the event of an audit, we’ll assist in dealing with the CRA. Contact us for a complimentary consultation.

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Estate Planning for Blended Families: Navigating Complex Relationships

estate planning for blended families

A blended family forms when two individuals come together (married or common-in-law) bringing a child/children from previous relationships. They may then have a child/children together. The dynamics of this family arrangement can be complicated, resulting in both rewards and challenges. Financial and/or emotional issues often arise when one of the partners passes, revealing a mix of expectations from the remaining partner, children, and the ex-spouse(s). To reduce conflict, mistrust, and/or discord, it’s important to have open discussions and to develop a detailed and comprehensive estate plan, particularly if ownership of a business is involved. Preparation and communication are key to easing family dynamics. So, what does estate planning for blended families in Canada look like? 

Estate planning tips for blended families:

The following are some estate planning tips to promote harmony in a blended family.

  • Keep estate documents updated: Be aware that separation/divorce does not affect pre-existing beneficiary designations. Ensure all documents are updated to reflect the blended status of your family (RRSPs, pension, insurance, will, etc.). 
  • Establish a mutual wills agreement: This contract between partners prohibits both from changing their will without the consent of the other. Mutual wills restrict the future testamentary freedom of the surviving spouse. 
  • Appoint a trustworthy, reliable executor, someone acceptable to all family members.
  • Consider a prenup: Creating a prenup presents the opportunity to begin communication and negotiation of difficult financial issues, providing protection and certainty for all involved/affected. Ensure the process is collaborative and based on mediation principles. 
  • Consider a trust: A trust (a fiduciary relationship that gives the trustee the right to hold title to property/assets for the benefit of a third party/parties) assists in the distribution of assets, solidifying a desired outcome. Tailor the trust to your preferences.
  • Communicate: Open, meaningful, ongoing dialogue with your partner and beneficiaries provides a means for making adjustments as circumstances change. 
  • Establish a power of attorney: If a partner is alive but unable to make decisions (personal care, property, business), a power of attorney may ensure that the new spouse/common-in-law partner is in charge of decision-making, reducing conflict with the ex-spouse and/or children. 
  • Seek advice: Obtain advice/assistance regarding the unique tax and law challenges of your blended family situation. Your chartered professional accountant can help guide you through the twists, turns, and pitfalls of estate planning (capital gains tax, estate-related taxes, and other expenses), particularly when ownership of a business is involved. 

A blended family often results in complicated estate planning challenges, particularly when a business is involved. Open and honest communication with all involved helps ensure harmonious relations. Keep beneficiary designations and documents current. Obtain advice to ensure that your estate plan meets your needs and desires. Consider tax and family law obligations. Contact your chartered professional accountant for assistance. 

Need help with business estate planning? Looking for advice and/or guidance? Cook and Company Chartered Professional Accountants (based out of Calgary and Edmonton) serve clients across Canada/United States, providing quality assurance, succession, and tax planning services for privately owned and managed companies. A detailed, tactful understanding of estate planning assists your company. Contact us today for a complimentary consultation.

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Succession Planning: Preparing Your Business for the Future

Succession Planing

All business owners/managers strive for a stable, growing, profitable company. They plan, innovate, create, and organize in pursuit of their goals. But, what about the future of the company? Who will take over when the business owner/management retires, sells, or passes? How can owners/managers ensure that the business will survive and thrive? How can they be sure the outcome meets their needs and desires? Succession planning is a large part of the answer.

What is succession planning?

When people hear the term succession planning, they often think of personal wills and handing down money and/or property to family members. But what is a succession plan in business? Business succession planning refers to an exit strategy for business owners/managers, the steps taken to shape the future of the company in ways that meet the owner’s desires and/or needs. If a company owner plans on selling, succession planning enables a successful transition of ownership. If retirement is what an owner chooses, succession planning is aimed at finding the person(s) best suited to take over and identifying and developing a future leader(s). Business succession planning typically involves: 

  • Assessing current/future business needs according to the company’s strategic plan and their priority goals, projects, and/ or programs
  • Identifying individuals whose potential, skills, and talents best help the company meet its needs/goals
  • Developing plans to manage gaps in skills and/or capabilities that may occur if a key leader/leaders leave the company
  • Cross-training employees/managers to assist in the development of skills, knowledge, and an understanding of the business
  • Preparing for future changes and/or emergencies (when the unexpected arises)
  • Ensuring smooth business operation should owners/managers/employees retire or leave the company

Business succession planning focuses on more than the senior manager/executive, encompassing all key positions and all functions that require experience, skill, and/or seniority. 

What is the importance of succession planning?

The following items illuminate the importance of business succession planning. 

  • Ensures survival of unforeseen events: Abrupt resignation, illness, death, personal problems, and/or arrest may result in an unexpected vacancy in an important company position. Though you can not foresee these events, your company can plan, prepare, and strategize possible responses to ensure the smooth operation of the business. 
  • Forces long-term thinking: It’s easy to focus on weekly meetings, quarterly earnings, and yearly reports. Business succession planning forces a company to consider the future, helping plan and create a wise course for the company. 
  • Promotes communication: Succession planning requires the cooperation and participation of all department heads and senior management members. This promotes communication, improving day-to-day work. 
  • Saves money: Being unprepared for vacant positions risks your business incurring considerable costs as you search for suitable replacements. Attracting qualified people from their current positions can be an expensive undertaking. Succession planning can save you the cost of hiring outside employees for key roles as you have access to employees prepared for promotion from within. 
  • Motivates employees: A succession plan informs employees that you are planning for the future, committed to business growth/survival, dedicated to stability, and interested in internal promotion (developing staff for leadership positions). This creates confidence and motivates employees to give their best.  

What are the benefits of succession planning?

There are many advantages for employers and employees to having a well-developed succession plan in place.

  • Awareness that there is a chance for advancement/ownership empowers employees and results in higher job satisfaction
  • Succession planning reinforces employees’ career development
  • Commitment to succession planning results in supervisors mentoring employees to develop knowledge and expertise
  • Planning promotes tracking of employee value/skill/knowledge/loyalty with the intention of internally filling positions that arise
  • Promotes sharing of company values/vision with leaders/employees
  • A new generation of leaders is prepared for eventual need(s)
  • Reassures investors/shareholders during times of change

The steps of business succession planning:

There are a series of logical, beneficial steps that assist with successful business succession planning.

  • Identify possible serious business challenges for the next one to five years.
  • Identify employment positions that are critical for supporting business continuity.
  • Identify skills, competencies, and knowledge that are critical factors for success.
  • Consider high-potential employees, assessing possible future positions.
  • Select the skills/knowledge/competencies employees need to be successful in their positions and to meet the business challenges identified.
  • Capture the knowledge possessed by individuals before they depart the organization (mentorship programs, personal productivity tools, knowledge maps, manuals, storytelling, interviews, etc.).
  • Use targeted career development strategies to create a talent pool of individuals/employees to step into critical positions.

Transferring the ownership and/or management of a business is a professionally and personally delicate process. Without careful planning, a number of issues and/or mistakes may arise. Updating and revising your company’s succession plan regularly is critical. Constantly amend your plan, making changes as your needs/desires change and to meet the current business environment. Smooth transitions are achievable when you’re well-prepared. Talk to your Chartered Professional Accountant. They have the expertise, experience, and knowledge to help create and maintain a successful business succession plan. 

Need help with business succession planning? Looking for business guidance and/or advice? Cook and Company Chartered Professional Accountants are based out of Calgary and Edmonton, Alberta, serving clients across the United States and Canada. We provide high-quality assurance, succession, and tax planning services for a variety of privately owned and managed companies. Our detailed and tactful understanding of succession planning and its many parts is available to assist your company. Contact us today for a complimentary consultation. 

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Common Errors in Accounting and How to Avoid Them

common errors in accounting

Keeping accurate up-to-date books helps a company make informed financial decisions and avoid mishaps that can affect financial health. However, tracking your business’ income, expenses, taxes and vendor payments is complicated and time-consuming. Including an item in the appropriate account, applying the correct description or code for the item and entering the correct amount takes time and attention. Accounting errors inevitably occur. The following are the most common types of errors in accounting that business owners make and suggestions on how to prevent accounting errors. 

What is an error in accounting?

Accounting errors are unintended accidents; inadvertent mistakes. Sometimes accounting errors are caused by transposing a number or hitting an incorrect key. Other times they stem from a misunderstanding of accounting rules and/or company policy. Accounting departments attempt to limit errors, especially in data that flows into financial reporting used by stakeholders. 

What are the most common errors in accounting?

  • Improper record keeping: Record keeping is the act or practice of recording important information for future reference. It involves identifying a transaction, recording it, classifying it, posting it and balancing the account. It may involve paper copies but can also be managed digitally. To avoid improper record keeping, implement a receipt capture, filing and backup system and enforce its proper use. 
  • Failing to do monthly reviews of your financial statements: A profit and loss statement provides a snapshot of a company’s sales, expenses and profit for a given accounting period. A balance sheet statement reports the ending balance of a company’s assets, liabilities and equity for a given accounting period. These statements provide insight into a company’s financial health. Financial statement analysis should be done on a regular basis (preferably monthly) to ensure all expenses have been categorized accurately and account balances have been reconciled. Add this task to the monthly duties schedule.
  • Neglecting to analyze budget vs. actual expenses: A budget versus actual expense analysis should be performed at the end of each month and each quarter to be sure your business is adhering to the budget. This analysis uncovers variances that require corrective action and helps determine areas where you can cut back. Schedule this analysis into your monthly duties roster. 
  • Neglecting reconciliations: When you reconcile your accounts at the end of the month, you validate the information in your books against an external document (the bank or credit card statement). Regularly reviewing business bank accounts against your books helps reduce the incidence of fraudulent transactions. It ensures you discover errors and thus prevents issues from developing. Put a note in your calendar to reconcile your bank and credit card accounts each month.

  • Failing to reconcile loan accounts: It’s important to reconcile your loan account each time you receive a statement as this is the easiest way to ensure the liabilities portion of your balance sheet is accurate. Put a note in your calendar to ensure your loan account is reconciled regularly.

  • Leaving undeposited funds on the books: Undeposited funds on the books means the payment has been posted but the deposit hasn’t been. This makes revenue look larger than it is, causing incorrect tax payments and inaccurate assumptions about business growth. This error can be avoided with proper workflows.

  • A lack of data backup: In case the device that stores your business’ financial information is lost, stolen or hacked, it’s important to have the information backed up. There are many backup options available.

  • Not utilizing accounting software: Investing in the right accounting software helps you avoid mistakes and makes it easier to handle your finances. Accounting software ensures you have all the historical data you need to manage your books, payroll and taxes. Choose accounting software that integrates with your bank account and has backup capability.

  • Inadequate checks and balances: No one person in the business should handle business funds without oversight. Ensure the person who does the bookkeeping in your business isn’t the same person making deposits for the company. Avoid giving employees signing authority on your business bank accounts. Make sure you review your business’s bank statements, including images of cancelled checks, on a monthly basis.

Accurate accounting information is critical for a business. Though there is no sure way to eliminate all accounting errors, understanding what errors are common and where to look for them is an important first step. Processes and controls help minimize their occurrence. Using good accounting software and preventive controls helps create a less error-prone accounting environment. Accurate books allow you to make informed decisions that will help improve your bottom line. Correction of errors in accounting is crucial.

Need help establishing a good accounting system and/or incorporating accounting software? Looking for business advice? Contact Cook and Company Chartered Professional Accountants. We are based out of Calgary, Alberta, serving clients across Canada and the United States. We provide high-quality tax, assurance and succession planning services for various privately-owned and managed companies. Contact us for a complimentary consultation.

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Financial, Community and Accounting Resources for New Canadians

Attending resources for new Canadians

In the year 2022, Canada welcomed 437,180 immigrants and saw a net increase in the number of non-permanent residents estimated at 607,782, a population growth of  2.7%. International migration accounted for 95.9% of all growth recorded. Much of this increase is related to efforts by the Canadian Government to ease labour shortages, drive our economy and help bridge the demographic gap. 

The decision to immigrate to Canada is a big step. Those arriving require advice and guidance from the time they decide to immigrate until they’re settled in Canada. They need to get familiar with financial institutions, navigate the education system, find housing and secure a job. It may be necessary to become informed about work and study permits, visitor and business visas, inadmissibility, permanent residence and citizenship. In short, they need to become aware of Canadian systems and the resources and tools available. So what financial, accounting and community resources are available to new Canadians?

Resources available to immigrants:   

There are many government and community resources and tools for new Canadians to help them navigate the laws and culture of their new home. Don’t forget CPAs! They can help newcomers and more established immigrants answer the many financial questions that arise when people come to this country.

New to Canada? Looking for advice? Contact Cook and Company Chartered Professional Accountants. We are based out of Calgary, Alberta, serving clients across Canada and the United States. We provide high-quality tax, assurance and succession planning services for a wide variety of privately-owned and managed companies. Contact us for a complimentary consultation.

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How to Make your Business Taxes Easier Next Year

Two people sitting down sharing how to make business taxes easier

Business income taxes are a year-round experience, not a single event. Having just paid your taxes, you likely aren’t thinking of the next tax season. However, there’s no such thing as “too early” to think about future business taxes. So, how can you make tax preparation easier next year? How can you simplify the process? The following are some ways to make the next tax season less complicated and more relaxed: 

  • Stay informed: If you’re looking for useful tips, helpful resources and current information, check out the Government of Canada’s web page for small businesses and the self-employed. 
  • Establish a tax calendar: This essential tax-planning tool helps you keep track of important dates and deadlines. Find these dates and deadlines on the Government of Canada’s website for important dates for corporations/businesses. 
  • Classify your business correctly as this affects the taxes required. For information on Sole Proprietors, Corporations and Cooperatives, see the Government of Canada’s website. If you’re still not sure what classification your business comes under, consult your CPA. 
  • Keep accurate, detailed, and updated records: This makes it easier to organize, check and file your business taxes without missing possible deductions or increasing your risk of an audit. Invest in accounting software to simplify accurate record keeping. Keep all financial information (such as your profit and loss statement, balance sheet, etc.) up to date to make filing easier during next year’s tax season.
  • Track expenses: As the government allows credits and tax deductions for qualified business expenses, it’s wise to keep track of all business-related expenses throughout the year. As the CRA does not accept credit card statements as proof of expenses, in order to take advantage of these tax deductions you must collect receipts for all business-related activities including accounting fees, business advertising and promotional expenses, business licenses and memberships, use of home expenses, interest and bank charges, insurance premiums, meals and entertainment, office expenses, rent, repairs and maintenance, tools and equipment, vehicle expenses, and parking fees. Record and file them appropriately. You can keep physical receipts or digital copies.
  • Keep business and personal banking separate: Open a dedicated bank account for your business, preferably one with online access as this makes it easier to make payments and do bank reconciliations. If you need business money for personal expenses, do a regular transfer to your personal account. This will make bookkeeping much easier.  Don’t use your personal credit card for work purchases or your business card for personal purchases.
  • Get organized:  Place your tax return and tax documents in a safe place where you’ll be able to quickly and easily find them. Separate any documents you receive that might have tax implications into at least four different categories including income items, deductions, business changes and others. Organize documents into each file accordingly. Better yet, digitize. It’s stressful keeping receipts, forms and other necessary paperwork organized and easily available. There are cloud-based platforms you can use to take pictures of receipts and categorize the expense.
  • Hire a CPA: Most small businesses prefer to have a Chartered Professional Accountant complete their Canadian income tax returns. This saves time and effort, provides assurance of accuracy and increases your chances of efficient tax planning.

As a business owner, you have a lot to think about such as daily operations, growth strategies, building/maintaining your customer base, hiring/retaining quality employees, etc. Use these tips to help make your business taxes and tax filing easier next tax season. It’ll be one less thing to worry about!

Not sure what tax deductions your company qualifies for? Need help with tax planning strategies? Contact Cook and Company Chartered Professional Accountants. Whether you operate a sole proprietorship or a sizable corporation with multiple subsidiaries, we use our experience and expertise to assist you. Contact us for a complimentary consultation.