9 Tips For Managing Your Customer Receivables
Any sales that occur within a business where payment is not made up front (eg. retail) or in advance of the sale (eg. down payment for a car), is reflected as an “Accounts Receivable”, which is accounting terminology for amounts owing by customers to a business. It is good to have accounts receivable, as this means you are generating sales. The downside, however, of having accounts receivable is that it represents cash that you don't have now, and along with that comes the possibility that your customers won’t pay you. Luckily a good system to manage your accounts receivable will help to reduce the number of non paying customers thereby avoiding bad debts. Below are some steps to help manage and collect on your accounts receivable:
7 Qualities of Highly Desirable Clients
When you are a business owner/freelancer, there is wonderful feeling of gratification when you land a great client. These are clients that ask great questions, respect our work and make us feel happy to have chosen the entrepreneurial route. Then there are the not so great clients who have unrealistic expectations, are unimaginative and often just plain clueless.
It should also go without saying that we must also do what it takes to be provide an excellent experience to our clients and customers. It is not dissimilar from being in a relationship with a partner or spouse and for both sides to get the most out of it, you as the service provider, must also be responsive, respectful, fair and transparent.
What Types of Car Expenses Can Business Owners Deduct
Access to a car can be crucial to running a small business effectively. Costs of ownership, however, can be high relative to your revenues, especially in the early stages when your business is not hugely profitable. Luckily, Revenue Canada (CRA) and Revenue Quebec (RQ) allow both unincorporated/self employed individuals and owners/employees of corporations, who use their cars to generate income, to deduct the relevant expenses. Both CRA and RQ provide detailed guidance and have specific rules relating to the write off of car expenses. I discuss some of the main provisions that impact small business owners in this article and provide guidance on the differences between unincorporated (self employed/small business) owners and corporations.
Make Your Taxes Easier with this Detailed Checklist
The deadline to file tax returns is quickly approaching, resulting in various degrees anxiety for some taxpayers and accountants. The good news is that the stress can be managed fairly easily with some simple organization techniques. The most effective starting point is to evaluate your tax situation and prepare a checklist of the documentation that you will need with respect to your specific tax situation. A checklist can help to ensure that important items are not overlooked in the rush to put everything together (and, of course, its always satisfying to cross something off the list).
Guidance on Deducting Home Office Expenses
One of the benefits of having a home based business (for freelancers, self employed contractors and small business owners) is that you can deduct the expenses relating to the space that you use to work. This can result in a reduction in your tax bill for costs that you would incur regardless, which is certainly an incentive to being your own boss.
Criteria for Deductibility:
For home office expenses to be deductible, they have to meet the following criteria:
It has to be your principal place of business i.e. you cannot deduct home office expenses if you have another office that relates to your business, elsewhere, even if you work 22 hours a day or you check your blackberry in bed.
The space designated as your home office is used to earn business income and/or you meet clients or customers on a regular basis. You can deduct expenses relating to the workspace in your garage which is used for home improvement projects.
Guidance on Registering for Payroll and Remitting Source Deductions
There comes a time for many small business owners when they decide that they need to hire employees. This is usually an excellent sign as it means a) the business is growing and b) the small business owner has learned to delegate. It also means that additional paperwork needs to be filled out and additional taxes need to be paid. The simplest option when deciding to augment your workforce is to have the new worker invoice the business, based on hours worked or some other formula. Unfortunately, there are very specific rules as to who qualifies as a self employed contractor. Essentially, if your have someone that works full time, has little flexibility with respect to the hours that they work and you provide the tools such as a desk/office, computer etc, then there is a good chance that the tax authorities will classify them as an employee. In this case, where your worker is clearly an employee, you must register for payroll, pay them a salary and submit regular, periodic payroll reports and payments to the Canada Revenue Agency (CRA). As usual, if you live in Quebec, you must submit to Revenue Quebec (MRQ) as well.
How to Calculate CPP/QPP Contributions If You Are Self Employed
When you are self-employed, you are essentially taking on the role of employer and employee. As such self-employed individuals are required to remit both portions of the CPP or QPP to Revenue Canada or Revenue Quebec respectively, which is calculated on your earnings for the year. This only applies to unincorporated business who declare business income as part of their personal tax return (T1)
12 Tax Tips for the Self Employed
The self-employed lifestyle holds great promise when you first start being self employed, however you quickly find yourself doing things that you would never have dreamed of. You are expected to take on role of salesperson, market researcher, accountant, lawyer and social media expert, while not getting paid for any of it. Your available funds do not allow for outsourcing and at times you are not even aware of what you don’t know. Luckily the internet provides a wealth of tips and tricks to make these tasks easier, and you might actually find that you enjoy taking on some of these challenges. Ensuring that you keep on top of your finances and tax obligations is among the most important of these tasks for which it is essential to have a system in place so that you can maximize tax deductions, minimize taxes payable and reduce amounts that you have to pay to CRA and RQ.
Excel for Small Business Owners
As a confirmed excel nerd, there is something about large amounts of data that I am inextricably drawn towards . I suppose it has something to do with an affinity for organization combined with a love of numbers and the innate desire to solve problems. As an accountant and financial consultant , I am often presented with the task of organizing and analysing data into a format that allows for greater insight into my clients businesses . And although good accounting software is important for most small business owners, especially once they reach a certain size, a great deal of analysis and reporting is done most effectively in excel.
8 Inexpensive Ways to Market Your Services
One of the most daunting aspects of starting a new small service based business is building a client base (and nothing is quite so exciting as getting those first few clients). When trying to generate new business, it is important to cast a wide net as you never know where potential clients may be lurking. Once you have established your business, you will discover the methods that work best for you and you can finesse your marketing strategy. You can also choose to be more selective as you determine which type of client is the best fit for your business.
There are many ways to build a client base, even with limited resources, some of which are discussed below:
Tax Return Checklist for Individuals and Unincorporated Business Owners
The deadline to file tax returns is starting to loom large, resulting in anxiety for some individuals and small business owners. The good news is that the stress can be managed fairly easily with some simple organization techniques. The best starting point is to evaluate your tax situation and prepare a checklist of all the documentation that you will need with respect to your specific tax situation. A checklist can help reduce (or eliminate) important items that might get forgotten in the rush to put everything together (and its always satisfying to cross something off the list). I have compiled a list of some of the more common income, deductions and credits that the majority of taxpayers are likely to have:
9 Year End Tax Planning Tips for Small Business Owners
For numerous people around the world, the end of this year cannot come soon enough. It has been an unprecedented few months, the effects of which will be felt for many years to come. And while it has been extremely difficult for some small business owners such as restaurants and storefront retail, others have seen their businesses flourish. e.g. toilet paper manufacturers, Amazon and Zoom. Many businesses were able to pivot their business models to provide goods and services that cater to the “new normal” in interesting and creative ways. Some started selling masks while others increased their online course offerings. Beleaguered restaurants started expanding their delivery menus and offerings. To a dispassionate business analyst, this year has been somewhat fascinating and will provide a great deal of data to economists and analysts alike in the years to come.
It is time for business owners everywhere to start contemplating some end of year tax planning tips to not only ensure that they can maximize their tax deductions and reduce taxes payable, but to streamline the tax filing process in the New Year. Even if you are incorporated and your year end date is not December 31st, it is a good time to take advantage of calendar year deadlines for personal tax planning purposes.
Top 6 Signs Your Small Business Might Need a New Accountant
I met with a small business owner recently who had just purchased a retail business and was looking for a new accountant. It seems that the current accountant was reviewing her books on a quarterly basis, preparing financial statements and doing the year-end tax returns – all typical accountant stuff. The problem was that the accountant, while charging this small business a fairly significant amount of money, was not really adding any value to their business. The bookkeeping, which was done by the previous business owner, was still being entered manually in ledgers (!). The quarterly accounting review consisted of checking the ledgers for mathematical accuracy and ensuring no major deductions had been missed without any discussion regarding the performance of the business. Worst of all, the accountant was not responding to the client’s requests for a meeting to discuss the financial performance of the business
Why a Separate Bank Account is Essential for Your Small Business
If you are self employed or a small business owner taking care of your own accounting and business finances, you have probably discovered that this can be time consuming and occasionally frustrating. It can sometimes be difficult to know if you are doing things correctly. Consequently, you procrastinate, which makes things worse at year end or tax time. To combat the problem it is important to have tools in place to facilitate the process and make it less painful, which could include accounting software and/or a bookkeeper as well as a good organization system for your documents, whether you have a paperless office or a manual filing system. Another very simple measure that you can take is to have a separate bank and credit card account for your business.