CJAD Finance Segment with Tommy Schnurmacher – Everything You Want to Know about Small Business
3 Invoicing Options for Small Businesses and Freelancers
If you are running a business of any size, it is essential that you have a system in place that allows you to get paid. A system can range in sophistication from a handwritten receipt to a software generated invoice which is part of an entity wide CRM system. To meet this need there are countless invoicing solutions available and many billions of dollars are spent annually on setting up systems to meet each business’ unique needs.
Almost all accounting software geared to small business owners and freelancers have built-in invoicing modules that integrate with your accounting. This is very useful when doing your books as you don’t have to worry about entering your invoicing manually and it allows you to track your accounts receivable and deposits into your bank account. There are also invoicing solutions that are not full-fledged accounting systems; however they usually integrate with the more popular software.
What is the Hiring Credit for Small Business?
Recently, a client received a notice from the CRA indicating that he had received a credit of $265. The explanation was simply that it was a hiring credit. Upon further research, we determined that the credit was a result of the provision in the 2011 budget that gave a credit to small business for hiring additional employees.
To be eligible for the credit, small businesses are not required to prepare any additional reporting. The small business hiring credit is simply calculated based on the increase in employment insurance (EI) premiums paid in 2011 over 2010. The maximum amount that any business is eligible to receive is $1,000.
Since the calculation is based on amounts reported on your T4 slips for 2010 and 2011, you are only eligible if the slips have been filed for these calendar years.
It appears that the amount of the credit is 100% of the excess of 2011 EI premiums over the 2010 EI premiums, up to aforementioned limit of $1,000.
The credit will not actually be paid out immediately, but applied to your payroll account.
New businesses (like my client) will receive the credit. Their 2010 EI premiums will be calculated at $0.
Note that since the EI credit should reduce your payroll expense, it will reduce your business expense and by extension, increase profits. The journal entry is as follows:
Dr. Payroll (EI) Liability
Cr. Payroll Expense
Once you receive your payroll statement from Revenue Canada indicating the amount of the credit, you may reduce the payroll liability owing to them by the same amount. You cannot, however, estimate the amount of the credit before you have received notification from Revenue Canada.
How to Update Wave Accounting for the 2012 QST Rate Increase
As of January 1st, 2012 the Quebec Sales Tax (QST Rate) which had gone up from 7.5% to 8.5% on January 1, 2011 will now increase to 9.5%. The effective sales tax in Quebec will go up from 13.925% to 14.975%. Since QST is calculated on the net amount + GST, the rate is not 14.5% but 14.975% . In other words the effective QST rate is 9.75%. Business owners will need to update their invoicing and accounting systems accordingly to ensure that the rate is properly reflected.
If you are using Wave Accounting, the update to the rates is fairly straightforward, with one little quirk. Since Wave, unlike Quickbooks, does not allow for the QST to be calculated on the GST, the effective rate has to entered manually. This is done as follows:
To update Quickbooks for the tax rate increase, please see “Updating Quickbooks for the 2011 QST Increase”. The procedure is essentially identical except for rates.
Quickbooks Online Banking: Setting Up, Deleting Matched Transactions and Manually Uploading Web Connect or Excel Files
15 Canadian Small Business Facts and Figures
Is Wave Accounting Software a Good Fit Your Small Business
Private Health Service Plans (PHSPs) for Small Businesses and Sole Proprietors: How to Make Medical Expenses Tax Deductible
One of the perks of being an employee, in many cases, is that your employer will provide health insurance benefits. Whether they pay for all of the premiums or only a portion, this can help to mitigate the costs significantly. Although, Canadians do have the luxury of Medicare, this is often inadequate and as anyone who has ever waited in an emergency ward can attest, may require you to take days off just to have your condition diagnosed (if one wants to look at this positively, it can be a great time to catch up on the classics). While the discussion of our Medicare system is a discussion for another time and another blog, the point is that having health insurance of some variety can help make the process a lot less painful. If you are self employed or a small business owner, however, the cost of health insurance can be prohibitive as you do not benefit from having a policy covering a group of people (thereby spreading the cost which is essentially how insurance companies work). On a personal level, Revenue Canada does provide for a tax credit, but this is only beneficial if your costs exceed 3% of your taxable income (up to approximately $2,000). Additionally the federal credit reduces your income taxes payable by 15% of the excess of medical expenses over the three year threshold. Eg. if your taxable income is $50,000 and your medical expenses are $2,000, your net federal reduction to your taxes payable is$2000 –( $50,000X3%) = $500X 15% = $75.00. This is very small relative to the actual expenses incurred.
So, how can a small business owner or self employed individual convert their medical expenses into business expenses? The answer is to use what is known as a Private Health Insurance Plan or a PHSP.
How to Be Less Forgetful: 17 Task Tracking Tips for Business Owners
Memento (Chris Nolan’s masterpiece) is the story of a man who suffers from short term memory loss i.e. he can’t remember anything for more than 15 minutes. This makes his life somewhat complicated, in that he needs to come up with a system to track his memories. Interestingly it also simplifies it as having no memories allows him to live his life entirely in the present. One of the many brilliant aspects of the film is that every time you watch it, it is a slightly different movie, as the memory of it does what memories do – they fade and dissolve and meld with other memories leaving us with an impression which is different from the actual events as they unfold. This is why eyewitness testimony is often unreliable, and individuals’ recollections tend to vary significantly.
Our particular ability to remember … and forget is unique to all of us. Some of us never forget a face while being hopeless with names. Others have trouble with appointments or where we left our keys. I often have trouble finding the right word or forget the entire plot of a movie or book. (Not to mention chunks of my life that are completely missing). Unfortunately , these memory malfunctions tend to get worse with age, so it is important to find ways to fend them off. From a work and business perspective, forgetting something important can have severe consequences. Below are some ideas to help you keep track of your tasks: