One of the most pervasive problems that face small business owners, particularly in the initial and growth stage of their enterprise, is maintaining sufficient cash flow. Many businesses with great potential have suffered an untimely demise due to their inability to pay their suppliers, employees and revenue agencies (always pay your government obligations otherwise Revenue Canada and Quebec will take matters into their own hands and potentially freeze your bank accounts). Often these issues can be prevented through a greater awareness of your small business’ cash flow requirements along with a proactive mindset. This list focuses on ten different ways you can manage this process to reduce the number of potential crises that arise:Read More
For the majority of income earners, employment status is pretty evident. If you are going to the same place every day, have an assigned cubicle with a computer and corporate stapler, and your boss tells you what you need to do, chances are that you are an employee. Conversely if you have several clients, use your own laptop, and are worried about where your next sale is going to come from, you are most likely, self employed.
It is the time of year when many accountants and tax preparers live, breathe, eat and sleep taxes (leaving very little time to write about them!). And while much of it is routine, there are numerous issues that arise, the treatment for which is not immediately apparent and can actually be quite interesting (perhaps more so to a tax nerd), some of which are compiled below:Read More
After thinking long and hard you have decided that is time to launch your own business. You have a great product or service, you’ve come up with a compelling business name, all the paperwork has been filed and you have picked out the perfect location (or setup a snazzy new home office). Everything seems to be set for your new independent life as a business owner. And then you realize that nobody except your spouse and cat knows about your new venture. So, how do you bring your fabulous new product to your target market's attention? One way is to use the “build it and they will come” approach. This is usually not particularly effective (even Google, who historically launches products with little fanfare, could benefit from a little more marketing). The other, more effective approach is to get out there and promote your business. Of course in the initial stages, marketing budgets tend to be miniscule. On the other hand, many new business owners have time on their hands, while they wait to be deluged by orders. Below is a list of 25 cost effective ways to promote your small business:
One of the responsibilities of being a small business owner requires having to submit a variety of tax declarations by specific deadlines or face consequences that involve penalties, interest and if left long enough, aggressive letters from Revenue Canada and Revenue Quebec. The bad news is that there is no way around it and ignoring it does not make it go away. The good news is that if you are prepared and organized it doesn’t have to be painful and can actually be quite straightforward with the right infrastructure. The first step is to be aware of the deadlines and understand the obligations that go along with it:Read More
The decision to incorporate is one that most small businesses face at some point in their lifetime. Incorporation, literally, represents the creation of a new person. Whereas a sole proprietorship is an extension of one's self, a corporation takes on a life of it's own; it can give birth to subsidiary, marry via a merger and die with a dissolution. It has to file it's own tax return, can be sued and has a set of rules that govern it's existence. Below are some of the points to consider when deciding whether to incorporate:Read More
As the end of the year draws nigh, 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.Read More
“I want to create a rival to Twitter. So I want it exactly the same except where it says What’s Happening? I want it to say How are you feeling?”(From the very funny "Clients from Hell")
This pretty much sums up the type of client we don't want - ridiculous expectations, unimaginative and just plain clueless. Conversely, there are some clients that are a pleasure to deal with. Ones that ask great questions, and make us feel happy to have chosen the entrepreneurial route. The more important of these are listed below:
The Goods and Services Tax or GST is a consumption tax that is charged on most goods and services sold within Canada, regardless of where your business is located. Subject to certain exceptions, all businesses are required to charge GST , currently at 5%, plus applicable provincial sales taxes. A business effectively acts as an agent for Revenue Canada by collecting the taxes and remitting them on a periodic basis. Businesses are also permitted to claim the taxes paid on expenses incurred that relate to their business activities. These are referred to as Input Tax Credits.
Does Your Business Need to Register?
Prior to engaging in any kind of commercial activity in Canada, all business owners need to determine how the GST and relevant provincial taxes apply to them. Essentially, all businesses that sell goods and services in Canada, for profit, are required to charge GST, except in the following circumstances:
Many small business owners (including myself) tend to focus on the more glamourous aspects of their business like sales and marketing and product/service development. As a result, accounting (poor misunderstood accounting) does not get the attention it deserve. In addition to the perception that an accounting system does not necessarily add value, they can also be a little intimidating. However, setting up an accounting system does not have to be complicated and should be considered essential for any small business or self employed owner (the reasons for which will be covered in my next post). A good software tends to handle most of the complexity of accounting as long as the data is entered accurately.
The primary steps in setting up an accounting system are represented below:
The Canadian real estate market has been a good place to invest in recent years, although comparisons to the US real estate bubble, which finally culminated in 2008, are continuing to intensify. Potential homeowners often find themselves seduced by their vision of the perfect home in the perfect neighbourhood and end up in a difficult situation, referred to as “house poor”, where the majority of their disposable income goes to paying down their mortgages. This can be avoided by ensuring that you realistically assess what you can afford and being financially responsible.Read More
Many of us have clients who are annoying, cheap, stupid , high maintenance or some combination thereof. As a new business owner, we are often stuck with these clients because we need them. However, we look forward to the day when we will have the thriving business that we so deserve, and fantasize about the spectacular way in which are going to fire them (you can shove your business into your rear orifice etc.) This is actually a productive fantasy as can help to channel and concentrate anger. Of course, in the majority of cases, a firing should be conducted with slightly less vigour.
While the Federal 2013 budget or the (more interestingly named) Economic Action Plan delivered on March 21, 2013 was not earth shattering in any way, it is interesting to note how well Canada is performing relative to other countries in the G7. According to the EAP, The Canadian economy has experienced the best performance among the Group of Seven (G-7) countries over the recovery, with the strongest record of economic growth and job creation. 950,000 jobs have been created since July 2009, the majority of which are full time positions in high wage industries. Additonally, Canada is only G-7 country to also have more than fully recovered business investment loss during the recession. And although the recovery has been broad based, investment in the manufacturing sector has been particularly strong.
The EAP also notes that while GDP growth over the next five years remains unchanged, expected growth for 2013 has been revised to 1.6% down from 2.0%. This will be offset by higher estimated growth between 2015 and 2017. Consequently, economists expect lower inflation in 2013. The CPI inflation in January 2013, compared with the prior year, was 0.5% while inflation for all of 2013 is expected to be lower than average at 1.3%. They also expect that the Canadian dollar will remain at par with the US dollar.
The 2013 budget introduces and extends certain initiatives for small business, while also impacting taxes payable for small business owners:
For the third year in a row, the Quebec Sales Tax (QST) will be changing. Fortunately, the change is not to the rate, which effectively remains the same, but rather an effort to harmonize the QST with the GST. Consequently, the most significant change is the method by which the rate is calculated.
In the past, the QST used to be calculated on the total sale plus GST. As a result the published rate was 9.5% while the effective rate was actually 9.975%. The harmonization of the GST and the QST requires that the QST be charged on the sale amount only, without the GST. As such the published rate and the effective rate will both be 9.975%. This is illustrated below: