Should You Surcharge?: October 7, 2022
Hello All,
Long time no speak! I recently returned from a month long trip, that was partially meant to provide inspiration and motivation. (Time will tell if it worked :) ).
In recent news, businesses will now be able to impose a surcharge to customers who pay by credit card. In the past, Visa and Mastercard specifically prohibited businesses from doing this (this was a standard clause in their agreements) If you were found in violation , your ability to accept credit cards could be revoked. This condition has now, however, been overturned as a result of a class action lawsuit that was filed in Canada (It is interesting to note that the prohibition still remains in place in Quebec).
The cost of accepting credit cards can be significant to small businesses. Whether you use Stripe, Paypal or another payment processor, many small businesses are charged approximately 3% per transaction for the privilege. Those with more volume can reduce their costs, but it it is still more expensive than debit cards or cheques. As we come closer to a cashless society (accelerated by the pandemic) businesses often have no choice as other forms of payment (cheque, wire transfer etc.) are untenable. Additionally, credit card issuers, who are very invested in having people use their credit cards, have heaped on the benefits often seen in the form of cash back bonuses or travel rewards.
The first major business to announce that they will be implementing a surcharge is Telus (a telephone company). This will almost certainly result in customers switching to another form of payment. Depending on what their competitors do, it might also result in customers leaving Telus and deciding to go with another service that does allow credit card payments. And herein lies the problem.
According to CFIB, 1 in 5 business are considering levying a surcharge. This would allow them to better absorb the costs in an economy where everything is becoming more expensive and is directly impacting business profits. The downside is that by increasing your prices, you risk losing customers, especially if you are in a competitive business. Customer purchase decisions are often based on price concerns, but also there is an element of goodwill which can be fragile. The perception that a business is charging more without an accompanying increase in value could have an impact on the customers decision to buy from you. If there is a readily available alternative, that does have a surcharge, many customers will choose them. Consequently, in deciding whether you want to increase your prices for customers who pay via credit card should be evaluated carefully. And while there is a specific reason to do it, the customer mostly only cares about the value that is being provided rather than the business reasons for the increase.
One of the essential pieces of advice I give to every new business owner is to set up a separate bank account for their business. Below is a blog post on the why (also see QBO tip below for related discussion):
MON, JUN 15
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.
Small Business Articles/Tips
Inflation Proof Your Business: Some tips for businesses that are feeling the effects of inflation
Debunking a myth around selling your stocks: Anyone with a stock portfolio or mutual funds is experiencing significant pain right now. This article delves into one of the myths around selling and gives some good advice on what to do.
Tax Stuff:
Rebates for GST and Dental Care: The Liberal government has proposed to double the GST credit for six months, provide direct payments for dental care for uninsured children under 12, and give a one-time $500 top-up to the Canada Housing Benefit for low-income renters.
Disability tax credit for those with Type 1 diabetes: This one was sent to me by a reader of this newsletter and is a significant inclusion for those suffering from Type 1 diabetes who were denied the tax credit in the past.
QuickBooks Tip: Combining Personal and Business
A client recently ask me if they should add their personal bank accounts to their banking download as they wanted to track their transactions. While this certainly makes sense, as many of us want to see our finances all in one place, it is usually not a good idea. This is because the primary purpose of an accounting software is track your business related transactions for which you then generate financial reports that inform you on the state of your business. When you combine personal transactions it clouds the business picture and your results become less meaningful. You can put a tag on them, or organize them differently using more sophisticated accounting techniques, but there is always the danger that you forget and these transactions forever remain as part of your business accounting.
Another issue is, that in the event of an audit, governments will want to see your books. Including personal transactions can lead to queries, that require justification, which may or may not be accepted. Regardless of whether you can explain it away, it leads to more conversations, which is exactly what you want to avoid when dealing with the government.
An alternative, is to use a personal tracking software such as Mint or the many other free or paid apps out there that will do a better job.
Books and Resources
Small Business Tax Facts(Sole Proprietorships/Registered Businesses/Self Employed Workers)
This book helps you have a better understanding of tax (brackets, tax rates, deductions etc), how it applies to your unincorporated small businesses and how to do your own tax return (or at least understand what your accountant does). It also includes a comprehensive breakdown of deductible expenses, by category with special sections on more complex deductions such as home office, vehicle and capital cost allowance.
FastStart Your Corporation(Corporations)
A step by step guide to starting your small business corporation, including what you need to know about incorporation, setting up your accounting and tax considerations.
QuickStart your QuickBooks(Sole Proprietorships and Corporations)
A comprehensive guide that takes you through the many features of QBO and gives you step by step instructions on how to setup and work with QBO day to day. It is ideal for beginners who have never used QBO before and also for those who are currently using it, but have questions or need guidance.
FastStart Your Business (Sole Proprietorships)
A step by step guide for anyone who is planning to start a Canadian business or become self employed (and does not want to incorporate) and wants to know what they need to do or simply has questions.
Small Business and Your Dividends (Corporations)
For incorporated small business owners who want to know more about small business dividends, the differences between salary vs dividends and which is better and step by step instructions on how to file your own dividend declarations (T5s).
Use discount code “special” to save 20% on any (or all) book(s) when you purchase from the website.
Please note that all books on my website are in PDF format.
If you prefer a print version, all books are also available at Amazon . Note that print versions purchased on Amazon include a complimentary PDF - you just need to email me and include proof of purchase.
Free Resources
Business 2022 Tax Deadline Calendar
Starting A Corporation Checklist
Start Your Business Checklist
Dividend Declarations Checklist
Small Business Tax Return Checklist
QBO Set Up Checklist.
Small Business Calculators
Previous newsletters.
Consultations
I also provide consultation services where I can answer your specific questions relating to your small business and/or finances, provide clarity and give you guidance. Additional details can be found here and here.
Note that I no longer provide ongoing accounting or tax preparation services.
Reviews/Feedback
I would love to hear your comments on my current blog posts, topic ideas for new blogs, book feedback or anything else that you want to talk to me about. You can use my feedback form or email me directly at ronika@montrealfinancial.ca.
For anyone who has purchased my books through Amazon or directly and found them useful, I would be very grateful for a review on Amazon (to leave a review you only need to have an account with Amazon even if you did not purchase the book from there).
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Hope everyone is enjoying the start of autumn ( and making that all important decision as to when to turn on the heat :))
Ronika