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.
A budget is a financial plan for a company’s future. It projects revenue and expenses, enabling a business to make confident financial decisions. Many business owners underestimate the value of a budget. The following are a number of reasons why your company needs a budget.
- Enables accurate goal setting: A budget helps a business to set goals, priorities and spending caps. It shows where funding comes from and where new strategies might bring in revenue. A budget reminds you of your overall strategies when making decisions.
- Assists in writing a business plan: A realistic budget is an essential part of the business plan needed to raise capital for a company. It Indicates that the company has a viable strategy and a practical plan for making a profit.
- Allows planning in advance: A budget helps your company account for long term needs, maximize profits and distribute revenue effectively over the course of a fiscal year.
- Informs spending decisions: A budget establishes spending limits, promoting accountability. It shows how increased expenditures in one department can be balanced by a decrease in another, helping managers work together to avoid overspending while still providing necessities.
- Informs and motivates employees: A budget helps to unify and engage your employees by giving them quantifiable goals on which to focus. It encourages them to think of solutions to sales shortfalls/expense overages and to help the business hit its budget targets.
- Unifies stakeholders: A solid budget gets stakeholders on board with your goals, keeping all parties in agreement with the company’s objectives and plans for meeting them. It helps gauge progress enabling investors, shareholders, owners and managers to work together to keep the company healthy and on track.
- Enables performance evaluation: By tracking revenue and expenses, a budget helps evaluate the performance of your business over the course of the fiscal year. It ensures your company is sticking to the plan, pinpoints problems and identifies opportunities.
- Attracts investors/satisfies lenders: A detailed budget that your company adheres to shows lenders and potential investors that your business plan is working and inspires confidence in your business.
- Aids in determining staffing needs: A comprehensive budget will help you decide how many full-time, part-time or contract employees you need to reach your goals. It will assist you in determining whether you should do your own accounting/payroll or hire an outside consulting firm.
- Assist communication: The clear plans and expectations of a budget minimize confusion and create clear communication between departments and levels of management.
Budgeting is especially important for small businesses where being off on cost projections or estimated earnings can have a devastating effect on the company. Creating a budget for your small business makes operating your company easier, more efficient, gives you the best chance of achieving your long term goals and helps you reap rewards for your hard work. Consider hiring a Chartered Professional Accountant with expertise in business finance. They willl help your business create a detailed and viable budget.
Need help in creating a detailed and realistic budget for your business? Contact Cook and Company Chartered Professional Accountants. Whether you operate a sole proprietorship or a sizable corporation with multiple subsidiaries, Cook and Company uses their experience and expertise to help your business. Contact us for a complimentary consultation.
Has your business ever had trouble paying vendors, making loan installments or meeting payroll requirements due to cash flow issues? You’re not alone! Cash flow management is one of the biggest challenges that small business owners face. Though every business’s needs are unique, the following are some strategies that may improve your company’s cash flow position and ease the strain on your working capital.
- Ask for a deposit: If your product or service requires considerable cash or effort before delivery, consider asking clients for a deposit.
- Examine your debt collection procedures: Be prompt with your collections and follow up on past-due accounts receivable by sending reminders. Offer a discount for early payment of invoices.
- Cut and/or delay expenses: If your company manufactures products, consider using lower-cost inputs to deliver the same goods. If you are a service company, opt for spending less time on the same work. Exhaust existing inventory before purchasing more. Hire part-time or contract employees to replace full-time employees.
- Get a business credit card: Choose a card that rewards with points that can be used for travel and business purchases. Many cards come with innovative reporting options that illustrate spending trends to help business owners optimize their cash flow.
- Get creative with marketing: Instead of expensive radio, TV or newspaper ads, opt for a less costly social media marketing campaign.
- Restructuring your terms with vendors (an extra week or two for payments) can make a substantial difference. Once you have reached an agreement, be timely and dependable with your payments.
- Finance purchase orders: If you’re a manufacturing or merchandising company and you require a significant amount of cash to fulfill your orders, financing purchase orders may be helpful. The financing company pays the vendor so you can acquire the merchandise/inventory you need to fulfill the order. This allows you to take large orders that you don’t yet have the cash to fill.
- Increase margins: If your business has a unique product/service or a high demand for your product/service, consider increasing your margins by increasing your charges.
- Sell or lease idle equipment: Utilize eBay or Craigslist to sell redundant or idle equipment and use the proceeds to ensure cash flow.
- Sell future revenue: Consider taking a loan that is automatically repaid via a percentage of your business’s credit/debit card transaction volume.
- Turn down, shift or postpone work to manage the volume of business for consistency over time. Offer good clients a discount for postponing their work, order or service. This will not be a viable strategy for companies with strong seasonal businesses (retailers, accountants, etc.).
- Invoice factoring involves selling your invoices (an asset) to a factoring company. Instead of waiting 15, 30 or 60 days for your money, your business gets payment upfront.
- Hire an accountant: A Chartered Professional Accountant will have the knowledge and experience to offer you creative solutions to your cash flow problems.
- Restructure payroll: Switching to a less frequent pay period can save on administrative costs (collecting, verifying, tabulating information). Direct deposit can also help stabilize your payroll withdrawals.
- Borrow money before you need it: When your business is doing well, open a business line of credit. Interest rates can be as low as 6 to 7%. Ask for more than you need so you have reserves to draw from when times are tough.
- Evaluate your cash flow on a regular basis. Calculate how much debt you can take on and not be overleveraged. Factor in time, interest, ROI. Have a repayment plan in place for borrowed money. If possible, maintain a rainy-day reserve in case of an emergency.
- Take advantage of technology by using apps and software to streamline your business processes and increase efficiency. Technology can enable you to spend less time worrying about cash flow and more time running your business.
Working capital is the fuel that powers small businesses. Managing cash flow is critical to running a profitable long-term business. Constantly look for new ways to improve cash flow management in your company.
Looking for ways to examine and improve your cash flow? Contact Cook and Company Chartered Professional Accountants. Whether you operate a sole proprietorship or a sizable corporation with multiple subsidiaries, Cook and Company uses their experience and expertise to help your business. Contact us for a complimentary consultation.