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.

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.

How to Establish a Budget for your Business

Establish a Budget for your Business

A budget is a financial plan for a company’s future. It projects revenue and expenses, enabling a business to make confident financial decisions. Creating a budget for your business promotes accurate goal setting, assists in writing a business plan, informs spending decisions, unifies stakeholders, attracts investors and aids in determining staffing needs. It 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. So, how do you go about preparing a business budget? 

  • Tally income sources: Determine how much money your business brings in each month and where that money comes from. Tally sources for a 12-month period. Look for seasonal patterns. 
  • Determine fixed costs: Fixed costs are expenses that don’t change. They may occur daily, weekly, monthly or yearly and include payments such as insurance, rent, website hosting, payroll, bank fees, accounting and legal services, supplies, debt repayment, taxes and equipment leasing.
  • Include variable expenses: Variable expenses are costs that change each month based on your business performance and activity such as usage-based utilities, shipping, packaging, sales commissions, travel costs, inventory, production costs, professional development and marketing.
  • Predict one-off costs: These costs fall outside the usual work of your company. They may be start-up costs (equipment, furniture, software) or infrequent expenses (business course, cost of moving to a new location, purchase of real estate, purchase of new equipment, large-scale facility upgrades, severance pay, etc).
  • Create a contingency fund: Prevent the problems associated with unexpected costs by keeping extra cash on hand for difficulties such as equipment breakage, inventory damage, a security breach, etc. 
  • Put it all together: Tally the total income and expenses. Then compare the cash flow in to the cash flow out in order to determine profitability. Adjust the figures throughout the year. As projections change, alter how money is spent and allocated.
  • Create a budget spreadsheet: A simple spreadsheet provides you with all the information you need at a glance making summarizing and reviewing your finances easy. Make budget evaluation a regular habit. Monitor and adjust numbers as needed.
  • Consider using accounting software: If you wish to learn how to make a budget and stick to it, try using accounting/bookkeeping software alongside your newly created budget to help you stay accountable.

Creating a budget takes time and effort but it’s worth the toil. Budgeting gives you the insights you need to make good decisions regarding your company’s finances. It’s an essential process for all businesses and will help you grow your company, compete and ensure a solid emergency fund. It’s especially important for small businesses where being off on cost projections or estimated earnings can have a devastating effect on the company. Consider hiring a chartered professional accountant with expertise in business finance. They’ll help your business create a detailed and viable budget. 

Need help preparing a budget? 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.

What is Goodwill and How is it Calculated?

What is Goodwill

The value of goodwill becomes apparent when a business is being acquired or sold. The amount an acquiring company pays over the target company’s net assets accounts for the value of positive goodwill.

What is goodwill?

Goodwill is an intangible asset that is built over time by the owner of a business. Tangible assets (buildings, equipment, land) are relatively simple to value. The calculation of goodwill is more complex and highly subjective, as goodwill doesn’t independently generate cash flow. The value of goodwill is determined by:

  • a company’s good name and positive reputation 
  • brand name 
  • solid customer base 
  • good customer relations
  • intellectual property/patents/copyrights 
  • domain name(s) 
  • licenses/permits
  • functioning consumer associations
  • good employee relations 
  • excellence of management 
  • proprietary technology
  • favourable contracts in place

Goodwill and Accounting:

Goodwill is an intangible asset that is listed under the long-term assets of a company’s balance sheet. It cannot be sold or transferred separately from the business as a whole. The value of goodwill is difficult to define as it doesn’t generate any cash flow for the business. Consequently, accounting standards require that a company regularly test its goodwill asset for impairment (a permanent decline in the value) and write down the asset if impairment can be proven. Companies must evaluate the level of their goodwill, at least once per year.

Types of Goodwill:

  • Purchased goodwill refers to when a business concern is purchased for an amount above the fair value of its net assets. It’s shown on the balance sheet as an asset.
  • Inherent goodwill is the opposite of purchased goodwill and represents the value of a business more than the fair value of its net assets. This type of goodwill is internally generated and arises over time due to reputation. It can be either positive or negative.
  • Business Goodwill is associated with the business, its position in the marketplace, and its customer service.
  • Professional Practice Goodwill relates to professional practices such as doctors, engineers, lawyers and accountants. It is classified as practitioner goodwill which is related to the reputation and skill of the individual professional and practice goodwill which arises from the practitioner’s track record, institutional reputation, location and operating procedures.

Factors affecting goodwill:

  1. Location of the business: A business that is located in a suitable area has a more favourable chance of higher goodwill than a business located in a remote location.
  2. Quality of goods and services:  A business that is providing a high quality of goods and services has a great chance of earning more goodwill than competitors who provide inferior goods and services.
  3. The efficiency of management: Efficient management results in an increase in profit for the business, enhancing goodwill.
  4. Business Risk: A business having lesser risk has a better chance of creating goodwill than a high-risk business.
  5. Nature of business refers to the type of products that a business deals with, the level of competition in the market, demand for the products and the regulations impacting the business. A business having a favourable outcome in all these areas will have greater goodwill.
  6. Favourable Contracts: A firm will enjoy higher goodwill if it has access to favourable contracts for the sale of products.
  7. Possession of trade-mark and patents: Firms that have patents and trademarks enjoy a monopoly in the market, which contributes to an increase of goodwill.
  8. Capital: A firm with a higher return on investment along with lesser capital investment will be considered by buyers as more profitable and have more goodwill.

How to Calculate It?

In principle, the goodwill calculation technique looks simple. However, it’s incredibly complicated.  Goodwill Formula = Consideration paid + Fair value of non-controlling interests + Fair value of equity previous interests – Fair value of net assets recognized.

Goodwill can be calculated by using the following five simple steps:

  1. Determine the consideration paid by the acquirer to the seller as part of the deal contract. The consideration is valued either by a fair valuation method or the share-based payment method. The consideration may be paid in the form of stocks, cash or cash-in-kind.
  2. Determine the fair value of the non-controlling interest in the acquired company. It’s the portion of equity ownership in a subsidiary that is not attributable to the parent company.
  3. Determine the fair value of equity in previous interests.
  4. Figure out the fair value of the net assets recognized in the acquired company. This is the net of the fair value of assets and the fair value of liabilities. It’s available on the balance sheet.
  5. The goodwill equation is calculated by adding the consideration paid (step 1), non-controlling interests (step 2), and the fair value of previous equity interests (step 3) and then deducting the net assets of the company (step 4). 

Goodwill encapsulates the value of the reputation of a company built over a significant period of time. It’s challenging to determine because it’s composed of subjective values. Transactions involving goodwill have a substantial amount of risk that the acquiring company could overvalue the goodwill in the acquisition and ultimately pay too much for the company being acquired.  

Need help understanding the complexities of calculating goodwill? Are you acquiring/selling a company and have questions regarding the determination of the goodwill value? Contact Cook and Company 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 to request a meeting.

KPIs for Small Businesses

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In order to ensure your company is consistently progressing, it’s important to quantify your business’ performance with hard data. Key performance indicators (KPIs) help you assess your business’ results and build strategies for achieving your goals.

 

What are KPIs?

Key performance indicators (KPIs) are a set of quantifiable measurements used to gauge a company’s overall long-term performance. They demonstrate how effectively a company is achieving key business objectives and help determine a company’s strategic, financial, and operational programs. KPIs can be financial, including cash flow forecasts, gross profit margins, revenue growth rates and relative market shares. They can also be anecdotal, measuring foot traffic in a store, employee retention, repeat customers and quality of customer experience. KPIs help keep a small business on track.

 

Criteria for KPIs:

The goals of each firm are unique. Therefore your company must craft their own KPIs. However, all KPIs should meet the following criteria:

  • Actionable: Your KPIs should concretely and objectively show you the improvements that you need to make to help your business.
  • Accurate: The best KPIs are well-defined, quantifiable measurements that are easy to calculate and interpret.
  • Timely: Using old data won’t give you a measure of what’s going on currently. It‘s only useful if you use it as a comparison tool for current data.
  • Impact the bottom line: Whether your goal is to improve net profit margins or customer satisfaction and retention, an improvement in your KPIs should result in progress toward your goal.

How to choose the right KPIs for your small business:

There is no definitive list of KPIs that all businesses should track. What you measure depends upon your industry, stage of business growth and company goals. However, there are some things you should consider when choosing your KPIs.

  • Your business objectives: Good KPIs help you measure what’s important to your business. What are your company’s goals related to your customers or clients, your employees, your operations and your marketing? Choosing KPIs based on your business objectives makes them more valuable.
  • Your business stage: A new company might focus on customer acquisition cost and user activation rate. Established companies may focus on employee retention to help them grow the business. Focus on KPIs that are most relevant to your stage of business.
  • Lagging and leading indicators:  A leading indicator is forward-looking and can influence results. A lagging indicator is backward-looking and will tell you what results have happened. For example, customer satisfaction is a leading indicator while profit is a lagging indicator. Both are necessary barometers of how your business is and will perform.

KPIs most every business should track:

There are a few key performance indicators that are advantageous for almost every business to track. Though they are not the only KPIs that your company should track, they’re a good place to start.

  • Sales revenue refers to the income from all customer purchases and is the first KPI most companies evaluate to gauge success and market demand.
  • Cash flow forecast: Flow in and out helps business owners assess whether their sales and margins are appropriate and estimate payment timing and likely costs. It also helps in tax preparation, new purchases, or identifying any cash surpluses. This is one of the most critical KPIs for small companies to track.
  • Net profit and net profit margin: Net profit equals your revenue minus expenses. Keeping track of this KPI lets you know whether your business earns more than it spends. Your net profit margin is used to measure how profitable your business is and is a stronger indicator of your company’s financial health.
  • Gross profit margin is an analytical metric expressed as a company’s net sales minus the cost of goods sold. It shows the amount of profit made before deducting selling, general, and administrative costs. The benefit of tracking this KPI over time is that you can easily quantify how much money you’re keeping against the amount paid out to suppliers.
  • Monthly recurring revenue (MMR): If your firms’ focus is on retaining customers and preventing churn, then this KPI is important. You’ll want to measure new MRR (new customers), expansion MRR (customer who upgraded their plan) and churn MRR (revenue lost from customers cancelling before their expected average customer lifespan).
  • Customer acquisition cost is a measure of how much you have to spend to get one new customer. This KPI helps to determine how costly, and ultimately how profitable, growth is for your company.

 

Tracking KPIs is vital to the health of your business. The most successful businesses use KPIs to help them measure outcomes. Picking the right KPIs and utilizing tools to monitor them can help you make informed decisions to grow your business. Small business owners should incorporate key performance indicators in their business strategy to help evaluate progress and set goals. Keep your company on track with KPIs!

 

Need advice and help to grow your company through the use of key performance indicators? 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.

 

 

References:

Fraud Tips for Business Owners

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All businesses are susceptible to fraud, though small and mid-sized businesses are the most common victims. These companies are targeted as they often have few preventative policies in place. Though it’s impossible to be fully protected, there are proactive steps that you can take to minimize exposure to fraud risks.

 

Types of fraud: Fraud comes in many forms from both inside and outside a business.

  • Internal Fraud: Employee theft is a common source of fraud (lost inventory, unethical accounting, theft of financial assets, fake expenses, overinflated commissions).
  • External Fraud: Customer fraud (counterfeit bills, bad cheques, stolen credit cards, fraudulent requests for refunds/returns), third-party contractor fraud (overbilling, fee schemes, failure to deliver) and computer fraud (hacking, information theft, data mining) are the most common types of external fraud.

 

Ways to reduce fraud: There are many policies and practices that can help to reduce the possibility of fraud in your business.

    • Create a fraud policy that covers topics such as what actions constitute fraud, how to report suspected fraud, who is responsible for investigating fraud, and confidentiality. Clearly outline your expectations related to employee conduct and the consequences for violating these policies.
    • Provide education for all employees (security awareness, fraud policy understanding). Make sure they are aware of the need to create secure passwords, that they change passwords often and to keep passwords safe. Inform them of the importance of phishing awareness and remind staff about the dangers of clicking on unexpected links and attachments.
    • Limit file access: Give employees access to only those files that are necessary to do their job. Require more than one person to complete key tasks (approving payments, writing cheques, managing petty cash, processing client receivables, approving overtime claims, recording in the accounting system).
    • Protect bank accounts and credit cards: Create separate bank and credit card accounts for your personal life and business. Check security systems your bank uses for online banking to be sure automatic logout is available. Ensure that your credit card provider has suitable fraud protections in place, such as automatic alerts if an employee spends over a certain amount. Limit how and with whom you share confidential banking information.
    • Keep detailed and accurate records: Accurate, detailed record-keeping (accounting records, inventory controls) helps shield your business from fraudulent activities.
    • Go paperless: Going digital reduces access to information, enables fraud preventive accounting controls, permits authorization limitations and creates an easy to trace audit trail.
    • Fine-tune payroll procedures: Ensure that payroll processes require HR and your payroll company to confirm deposit accounts with employees. Pay using direct deposit or open a separate business account to minimize circulation of your company’s bank account information. Use regular audits to keep check for falsified hours, inflated commissions, and other irregularities.
    • Use secure payment methods: Switch to direct deposit or fund transfers. Encrypt payment transactions and partner with a secure payment processor. Consider a cheque imaging solution (scanning or picture taking) making it possible for you to deposit money automatically.
    • Audit high-risk areas often: A daily check of accounts and statements is a great way to protect against fraud or accounting errors. Routinely audit areas of your business that deal in cash, refunds, product returns, inventory management and accounting functions.
  • Establish a thorough hiring process: Check each new hire’s references and previous employers. Do a criminal check, especially for those employees who handle cash, manage payments and have access to bank account information. Use a reputable service that specializes in pre-employment screening.
  • Keep your point-of-sale secure: Make sure all your POS devices are digitally secure. Install passwords and change them regularly. Choose systems that come with end-to-end encryption. Don’t connect your POS to external networks. At the end of each day, account for every POS device and secure devices in a location that only select employees can access.
  • Know who you’re dealing with: Record basic information about the businesses/clients you deal with (address, name, two phone numbers, references). Check who the owners are and how long they have been in business. Search the company’s name online with the term “scam” or “complaint.” Before engaging with suppliers, ask for recommendations from other business owners in your community.
  • Invest in insurance to help with the recovery of some or all of your losses in the event of fraud. Consult with an insurance specialist for help evaluating possible risks and determining what kind of insurance will best suit your business.
  • Get expert advice: You don’t have to figure it all out by yourself! Talk to a small business advisor and/or a commercial banking consultant about products and services to help prevent fraud.
  • Enable whistleblowing: Create a system that enables employees to anonymously report tips essential to dealing with fraud.
  • Update all devices to the latest security software, web browsers, and operating systems. Use antivirus software, anti-malware and firewalls.
  • Create a mobile device action plan to encrypt data. Make sure each employee has a separate user account, so you can trace activity if there’s a problem.
  • Back up critical business data and store the information in the cloud.
  • Secure Wi-Fi networks with Service Set Identifier (SSID) and password protection.

 

It’s easy to put off fraud prevention until an issue arises. Be proactive! By taking a few simple steps to put a fraud prevention plan into action, you’ll protect your business, establish a culture of zero-tolerance for fraud and help mitigate unforeseen threats in the future.

 

 

References:

Is the GST Quick Method Right for You?

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Completing your company’s GST claim can be a hassle! You have to track the GST you’ve been charged and the GST you’ve paid and back up these claims with invoices and receipts. If you miss any input tax credits, you pay too much. Luckily, the GST quick method can save business owners both tax and time. You can use the quick method if taxable sales for your business do not exceed $400,000 for the fiscal year. Instead of claiming the GST paid on purchases as an input tax credit, you need only remit a portion of the tax you collect to the Canada Revenue Agency (CRA).

The GST Quick Method:

  • Is a simplified accounting option (eliminates the need to record and report the actual GST paid or payable on most purchases)
  • Reduces paperwork
  • Simplifies calculations
  • Requires submission of  2.6% of the first $30,000 of gross revenue and 3.6% of the gross revenue after that
  • Can save you $1,000 or more each year
  • Allows you to claim ITCs on purchases of real property, capital property (computers, equipment, vehicles), eligible capital property, and improvements to those properties

You can use the GST quick method if: 

  • You’ve been in business continuously throughout the 365-day period ending immediately before your current reporting period
  • You’re a new registrant and you expect your taxable supplies to be $400,000 or less in your first full year of business
  • You didn’t revoke an election of the quick method or the simplified method for claiming ITCs during that 365-day period
  • You’re not a person listed under Exceptions
  • Your revenues are not more than $400,000 for either the period consisting of the first four consecutive fiscal quarters out of your last five fiscal quarters or the period consisting of the last four fiscal quarters out of your last five fiscal quarters.

Who can use the GST quick method?

Most goods and service-based small businesses are eligible to use the quick method.

  • IT consultants
  • delivery services
  • dry cleaners
  • auto repair shops
  • quick-service food outlets
  • house-cleaning services
  • campgrounds
  • caterers
  • delicatessens
  • painting contractors
  • photographers
  • taxi drivers
  • etc.

 

Who is ineligible for the GST quick method?

  • accountants or bookkeepers
  • financial consultants
  • listed financial institutions
  • lawyers (or law offices)
  • actuaries
  • notaries public
  • listed financial institutions
  • audit services
  • tax return preparers or tax consultants
  • municipalities, or local authorities designated as municipalities
  • public colleges, school authorities, or universities, established and operated not for profit
  • hospital authorities
  • charities and non-profit organizations with at least 40% government funding in the year

How do you elect to use the quick method?

You can elect to use the quick method by using online services:

  • You can also elect to use the quick method by completing Form GST74

 

Do you find calculating GST difficult and time-consuming? The GST Quick Method is faster and easier to use than the general procedure and, in most cases, saves you money. Check out your company’s eligibility for the Quick Method. Save time, money and hassle! Sign up for the GST Quick Method today.

 

Need help calculating your GST? Wondering if you qualify for the GST Quick Method? 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 you. Contact us for a complimentary consultation.

 

Resources:

How to Fix a Mistake on a Filed Tax Return

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You’ve added a stamp and mailed the envelope or you hit the send button and e-filed your tax return. Feels good to have this task done! Then you receive another receipt, realize you used the wrong date for your medical deductions, get another information slip in the mail, notice you incorrectly calculated your deductions, realize you input the wrong social insurance number and/or gave an incorrect bank account or routing number. Don’t panic! There are procedures to follow so you can change your tax return after filing and fix the mistake you’ve made.

 

If you’re requesting a change to a T1 income tax return, the adjustment can be accomplished online or by mail. You can request a change to the current year or any of the previous nine years. A separate request is required for each year you wish to amend.

  • By mail: Send a completed  T1 Adjustment Request form (T1-ADJ) to your tax center or send a signed letter asking for an adjustment to your return. You’ll need your social insurance number, the year of the return you are amending, your address and a phone number at which you can be reached.
  • Online: Use the change my return option found in My Account, a secure online service. You can access My Account in one of two ways, through a Sign-In Partner (selected financial institutions such as BMO and ING Direct) or by creating and using a CRA log-in. You’ll need your social insurance number, date of birth, current postal code and your copy of the tax return you are amending.

 

If you’re requesting a change to your T2 income tax return, you can do so by mail or online.

  • Online: Use commercial Canadian tax software or send your amended T2 tax return in barcode format to the CRA.
  • By mail: Send a letter to your tax center. Make sure you include the name of your corporation, your business number, the tax year and details including revised financial statements and revised schedules. Use Schedule 4 to carry back a loss, Schedule 21 to carry back foreign tax credits, Schedule 31 to carry back an investment tax credit and Schedule 42 to carry back a part I tax credit.

 

After making online changes to your tax return, keep all your receipts and supporting documents in case the CRA asks to see them. Provide supporting documents only if asked to do so and using the method of submission indicated in the CRA’s contact letter.

 

How long will it take for the change to be made?

The CRA will review your request for a change and advise you if the change is allowed by sending you a notice of reassessment or a letter explaining why the changes you requested are not possible. It will take approximately two weeks for a change requested online and eight weeks for a change requested by mail. Additional time may be needed if the CRA contacts you for more information or documentation. Requests which are submitted during the CRA’s peak return processing period, between March and July, will take longer.

 

If you realize, after submission, there’s an error on your tax return, don’t worry! There are procedures in place to help you make changes and adjustments. Tired of completing complex forms for tax? Contact a chartered professional accountant. They have the knowledge and expertise to make tax claims a breeze.

 

Need help preparing your tax return? Require assistance correcting a tax return? 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 you. Contact us for a complimentary consultation.

 

 

 

Resources: 

https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t2sch42.html

Managing Small Business Debt during COVID-19

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Three-quarters of Canadian small businesses have taken on debt as a result of COVID-19. As of November 3rd, 69% of Alberta businesses are open, 39% are back to pre-COVID staffing levels but only 21% are experiencing normal revenues. The Canadian Federation of Independent Businesses estimates that, if and when revenues return to normal, it will take most Alberta small businesses 1 ½ years to recover.  Business owners have two choices: try to save the business while attempting to settle outstanding accounts, or allow the business to fail with an exit strategy that minimizes the financial consequences.

Financial help available for those attempting to save their business:

    • CEBA (Canada Emergency Business Account) supports businesses by providing financing for expenses that cannot be avoided or deferred thereby helping to position businesses for successful relaunch when the economy reopens. CEBA is available from more than 220 financial institutions across the country. Repaying the balance of the loan on or before December 31, 2022, will result in loan forgiveness of 25%.  CEBA support is being expanded from $40K to $60K and is available to all eligible previous and new CEBA applicants.
    • CEWS (Canada Emergency Wage Subsidy) covers part of employee wages, retroactive to March 15. This enables businesses to re-hire workers, help prevent further job losses, and ease back into normal operations.
    • RRRF (Regional Relief and Recovery Fund) helps businesses and organizations in sectors that are key to regions and local economies. The fund is specifically targeted to those that may require additional help to recover from the COVID-19 pandemic, but have been unable to access other support measures.
    • CERS (Canada Emergency Rent Subsidy) provides direct and easy-to-access rent and mortgage support to qualifying organizations. Charities, nonprofits and qualifying businesses receive a subsidy of up to 65% of eligible expenses until December 19, 2020. Combined with the other support received under the CERS, businesses can receive a rent subsidy of up to 90%.
    • Loan Guarantee (for small and medium-size businesses): Export Development Canada (EDC) is working with financial institutions to guarantee 80% of new operating credit and cash flow term loans of up to $6.25 million to small and medium-sized enterprises. This financing support is to be used for operational expenses and is available to both exporting and non-exporting companies.
    • Co-Lending program (for small and medium-sized enterprises): Business Development Canada (BDC) is working with financial institutions to co-lend term loans of up to $6.25 million to small and medium-sized businesses for their operational cash flow requirements.

Tips for businesses regarding recovery:

  • Take care of your people: Implement best practices for safety. Allow those who can to work remotely. Establish a contingency plan for quarantined workers. Schedule regular updates and optimize technology to keep the lines of communication open and clear.
  • Evaluate capacity and resources: Review your expense items to see where you can shave costs. Find recurring operating expenses that can be suspended for a short term. Align personnel to production/sales. Defer discretionary expenses. Document cash inflow and outflow. Create a rolling cash flow forecast and update it weekly.
  • Communicate with suppliers to confirm whether existing purchase orders will be filled on time. This will help you manage your customers’ expectations and update your cash flow plan. Try to negotiate deferred payment terms for payables.
  • Reach out to customers and confirm that existing and planned orders are still on track. If they owe you money, discuss the ability to pay and the timing of payments. Offer markdowns if they can pay you quickly. You may have to defer production or loosen repayment terms.  Ask customers if they need anything else. With businesses closed and supply chains compromised, there may be a new opportunity for your company.
  • Talk to your banker: Present your banker with a solid restructuring plan. If possible, renegotiate your bank loan so it’s spread over a longer-term, reducing the interest payments and also the monthly repayment cost. Investigate the opportunity to lower interest rates. Consolidate business loans into one payment, which may reduce monthly costs.
  • Consider alternative lenders: Even in tight times, there are those who are looking to invest and alternative methods of financing. Consider peer-to-peer loans, a line of credit, invoice financing, an advance funding loan, non-bank lenders (ThinkingCapital, OnDeck), invoice factoring and a merchant cash advance.
  • Be open to change and move quickly: Look beyond the status quo. Adapt quickly to the changing situation. Look for new market demands. Explore adjacent markets. Consider new ways to use your expertise. Solve unique problems resulting from the situation thereby creating a new niche. Establish a regional supply chain for continuity.
  • Embrace digital possibilities: Digital technologies can provide new marketing, financing and networking opportunities. Create digital products and services. Use online platforms to gain efficiencies and create customer value. Enable remote working. Access regional, national, and global markets in a cost-effective way using e-commerce platforms.
  • Think outside the box: What can you do to increase revenues? Can you lease out a portion of your office to another business? Could you save on rent by working remotely? Get creative. Find ways to generate additional revenue from your existing assets.
  • Get outside help: Outside assistance can help you navigate the changes. Talk to your chartered accountant, your financial planner and/or your banker. They have experience and knowledge that may be helpful.

 

Do everything you can to keep your business running. With luck and perseverance, you can survive and possibly thrive through this pandemic. Learn from this experience so that you can bounce back stronger.

 

Need help navigating the current situation? Draw on the knowledge and experience of 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.

 

 

References:

Cybersecurity and Your Business

Cybersecurity and Your Business - Cook & Co - Professional Accountants - Featured Image

Cybersecurity is the technologies, processes, and practices designed to protect networks, devices, programs, and data from attack, damage, or unauthorized access. You may think that your business will not be a likely victim but the risk is not limited to businesses that sell products and handle credit card information and it’s not just large companies that are targeted. If your business collects, processes, and stores data on computers and other devices, you are at risk. Protecting your company and its information needs to be a top priority. There are a number of safety measures you can take to ensure that your systems, data and site are as secure as possible.

    • Train your employees: Establish basic cybersecurity practices and policies for your company and train all employees regarding these. Inform employees regarding all security issues. Have a clear email and Internet use policy. Provide regular updates on new protocols and conduct regular training sessions to review IT security best practices. Create a culture of cybersecurity awareness.
    • Secure your network, database and website: Install the latest anti-malware, antivirus, spam blockers, spyware detection and anti-ransomware software. Consider using a service like PayPal to process payments and protect customer information.
    • Establish safe passwords and authentication practices: Data breaches often happen due to lost, stolen, weak or easy to guess passwords. Consider a  Password Manager App, a software application designed to store and manage online credentials in an encrypted database. Multi-factor authentication that requires additional information to gain entry is another possibility. Change passwords every 3 months. Give employees access to only the specific data systems that they need for their jobs and require permission before installing any software. No one employee should have access to all data systems.
    • Implement penetration testing: Penetration testing involves hacking into your own system to expose vulnerabilities in your host network and network devices. It identifies problematic access points in your system and provides suggestions for hardware and software improvements to upgrade your security.
    • Provide firewall security: Install a firewall on all devices; a set of programs that prevent outsiders from accessing data on a private network. If employees work from home, ensure that their home systems are firewall protected. Firewalls give you the best chance of protecting your site before an attack is successful and they result in a faster and safer website. Many companies install internal firewalls to provide additional protection.
    • Do private browsing with a VPN (virtual private network): Business owners/employees often use temporary workplaces and remote locations (coffee shop, airport, home office) increasing the risk of outsiders gaining access to business data. A VPN creates an encrypted connection between your computer and the remote private network making it necessary to have the key to decode information. Your data can’t be monitored, tracked, collected and stored.
    • Create a mobile device action plan: Mobile devices (laptops, tablets, USB drives, smartphones) create a security risk for your company. Require employers to have password protection, encryption software, and a remote lock and wipe app.
    • Encrypt your emails: Email messages and attachments are not a safe way to send confidential/sensitive information. Email encryption software ensures that only the sender and recipient can read the email/attachment thus preventing data breaches. The email contains a hyperlink to a website controlled by the sender.
    • Subscribe to a Cloud service; an easy and affordable way to get data security from a company that specializes in handling security threats.
    • Backup business data and information: Automatically backup critical data (word processing documents, electronic spreadsheets, databases, financial files, human resources files, accounts receivable/payable files) and store the copies offsite or in the cloud. Check your backup regularly to ensure that it is functioning correctly.
    • Outsource your IT: A third-party IT provider hires and trains the best security people, gives you a set monthly fee, remotely manages your servers (24/7) and responds to emergencies.
    • Dispose of data safely: When disposing of outdated computers, completely destroy the data on the hard drive by using a wiping/degaussing system and then physically destroying it with a hard-drive shredder or crusher.
    • Secure your Wi-Fi network: Set up a wireless access point/router that is secure, encrypted and hidden. Password protect access to the router.
    • Talk to your professional accountant to ensure that your information is protected on their end.

 

Increase your vigilance regarding online security in order to protect your intellectual property, financial data, personal information, or other types of data from unauthorized access or exposure. Undertake proactive measures to protect your business computer, network, data, and website. Be aware of recent attacks and adjust your protection as needed. Stay ahead of cyber attacks, cybercriminals and emerging trends in cybercrime. The Canadian Center for Cyber Security provides online training, checklists, and information specific to protect online businesses.

 

Concerned about the safety of your company’s information? Want an accountant versed in cybersecurity? 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.

 

 

 

References:

https://www.wordstream.com/blog/ws/2019/03/12/video-advertising-trends

https://www.wordstream.com/blog/ws/2019/10/31/pre-roll-ads

https://smartyads.com/blog/what-is-ott-advertising/

https://instapage.com/blog/pre-roll-ads

https://instapage.com/blog/digital-advertising-trends

https://financesonline.com/advertising-trends/

https://financesonline.com/advertising-trends/

https://marutitech.com/benefits-chatbot/

https://blog.templatetoaster.com/google-alp/

https://www.business2community.com/digital-marketing/top-10-trends-in-digital-advertising-in-2020-02263555

https://www.singlegrain.com/digital-marketing/digital-marketing-trends-2020/

https://instapage.com/blog/what-is-outstream-video

https://www.curalate.com/blog/google-shoppable-ads/

https://www.3playmedia.com/2018/09/20/3-reasons-why-you-need-video-transcription/

https://www.tintup.com/blog/user-generated-content-definition/

https://www.google.com/search?client=firefox-b-d&q=what+is+a+remarketing+ad

https://www.investopedia.com/terms/o/over-top.asp

https://digitalguardian.com/blog/biggest-incidents-cybersecurity-past-10-years-infographic