Tag Archives: Bookkeeping Services Winnipeg

The Importance of a Budget

It is very surprising when speaking with business owners how few actually spend the time and effort developing a budget.  Preparing a budget could be a daunting task.  However, one can be convinced that the benefits of using a budget as a tool to steer your company and to monitor your progress far outweigh the” head in the sand” approach.  Having a budget can help you realize controlled growth rather than ad hoc growth and operating expenses.

A budget is essentially a financial plan for your business.  Using past data and current knowledge about your business, growth potential, competition and changes in your expenses, one can estimate how their business should perform in the future using a best estimate approach.    But let’s not kid ourselves.  There are quite a bit of guesses and assumptions brought into a budget.  However, one of the most important aspects of developing a budget is that an owner must think about the future of their business at a very detailed level.  In a sense then, they are mapping out a plan as to where their business should be in the next year or two and what needs to happen in order to make it happen.  This then gets them thinking about what steps are required to meet their budget estimates.  For example if one estimates a growth in sales of 20% next year, they have to ask themselves how do they think they can meet this goal?   A 20% increase in sales will not mean a 20% increase in profits.  Why?  Because more sales can mean more costs.  Will they have the space, the employees, the supplies, etc. to meet the increase in sales?  Are they planning to promote their company and if so, in what way and at what costs?   It is at this point of detail that some business owners start to squirm.  They are not comfortable thinking about so many details.

Often, budgets are only brought to the forefront when financing is needed.  Banks or investors start asking probing questions and also require a budget for a few years down the line.   They want to know your assumptions and a budget helps to give them some assurance of how their investment or loan will generate enough revenue for their payoff.   If you are one of those business owners who just don’t want to go there, the staff at Five Star Accounting can meet with you to ask some of these questions and work with you to develop your budget.  We would be happy to assist you in mapping out a plan for you to follow in taking your business where it potentially could and should be.   We hope you can agree that following a budget and knowing if you’re on track throughout the year is far better than operating with your head in the sand.  A budget really helps to lower anxiety and gives an owner a much better feeling of control.

Types of Corporations in Canada Influences the Tax Paid

In Canada, there are two types of corporations. The first type is the corporation created under federal law, and the second type is the corporation formed under the provincial laws of the provinces and territories. Typically the federal form is preferred because it allows business operations across the country and the statutes controlling the corporation are consistent. The province and territory statutes vary quite a bit concerning issues like the rights of minority shareholders, internal governance, financial recourses and soon.

When you start a business, there are basically three business structures to choose from: sole proprietorship, partnership or incorporation. There is a fourth form called a cooperative, but it’s a very specialized and uncommon business form. The choice of business form influences the types of deductions you are allowed to take. Incorporation is often chosen because it can allow you to maximize the benefits of expense deductions while limiting personal liability.

There are several corporation types in Canada as summarized below:

• Canadian-Controlled Private Corporation (CCPC) – resident in Canada and is not controlled by corporation(s) or person(s) outside of Canada.

• Private Corporation – resident in Canada, not a public corporation, and not controlled by one or more public corporations

• Public Corporation – resident in Canada and meets requirements for listing of shares on the stock exchange or elects to be designated as public under Regulation 4800(1)

• Other Corporation – corporation form that doesn’t fall within the other 3 types of corporations

The advantages of incorporating include limited liability, ongoing operations with transferable ownership, easier to raise capital, possible tax deferral and lower tax rates. For any of these reasons, sole proprietors may choose to incorporate. For example, the Canadian-Controlled Private Corporation eligible for a small business deduction will currently pay a net federal tax rate of 11 percent which may be much lower than a personal income rate.

Corporations are also able to deduct all operating expenses while sole proprietorships face limitations. This gives you much leeway in terms of controlling the tax you will owe. For example, corporations can pay out profits to its management and staff turning what would be taxable profit into a deductible expense. A sole proprietor would have to pay all the tax due on business profit and personal income. In addition, any legitimate and legal expense incurred to operate the corporation is deductible, while it may be more difficult to separate personal from business expenses in a sole proprietorship.

It’s important to make sure you are getting all possible tax deductions on a business. The business structure you choose makes the difference on the type and amount of those deductions in addition to the tax rate paid.

Helping Small Business Owners Succeed

As a small business owner, you’re often required to fill multiple roles in order to ensure your business’ success. You’re often pulled in so many different directions it’s hard for you to concentrate on what you love doing most, the reason why you decided to open your own business in the first place.

At Five Star Accounting, we are a team of experienced accounting and bookkeeping professionals who are passionate about what we do.  With our combined experience in the small business environment, we understand the unique demands of small business owners. We can help you with your small business bookkeeping and accounting requirements so that you can concentrate on what you are most passionate about.

Let's Talk About Business Expenses

If you are a business owner, expenses incurred while running your business is,well, a cost of doing business. Expenses are a way to offset income which would otherwise be taxed, and so they offer opportunities to decrease income taxes. However, you cannot expense everything and some allowable expenses are subject to certain limitations. Since you can only expense costs related to generating income, personal expenses are not deductible – they don’t help to produce an income. There are also expenses deducted under the capital cost allowance provision which represent an annual amount for depreciation related to assets acquired to assist in income generation but also expected to be in use for longer than a year.

There is a long list of business expenses and each one is carefully defined, sometimes in a complex manner. For example, there are stringent rules concerning documentation of all auto related expenses including the total amount of business related kilometres driven annually. There are limits on deductibility of lease payments, loan interest and depreciation. It is also necessary to prove that trips claimed were actually for business purposes.

The long list of possible business expenses includes bad debts, business-use-of-home, fuel costs, insurance, accounting and legal fees, maintenance and repairs, office expenses, property taxes, rent, salaries and benefits, supplies and many others. Each category is precisely defined by law and regulation, meaning you can’t just deduct an expense because you think it should be deductible. The expense must be related to commercial activity, meet the regulatory guidelines, be well documented with detailed receipts and incurred for the purpose of contributing to the production of profit.

Given the complexity of the tax laws and to avoid a tax audit as much as possible, it’s always wise to let an accountant determine which expenses are deductible. The staff at Five Star Accounting can provide invaluable guidance on appropriate expense documentation and ensure that the business is claiming all its allowable expenses.

Tips for Small Business Owners

Small business owners face a myriad of challenges. But small businesses also make up a huge portion of Canada’s workforce. According to Industry Canada, 98 per cent of companies here are considered small, and those businesses comprise 48 per cent of the country’s work force. To help survive in today’s challenging economy, below are a few tips for small business owners.

Help your accountant help you
Hire an accounting service such as Five Star Accounting to manage your finances. An accountant files tax returns, tracks a company’s finances and keeps up with all the current and latest regulations. But a good accountant can do far more than just balance your company’s budget. Accountants can also help expand your company and grow your finances. Get organized before meeting with your accountant so that you’re not wasting time getting caught up.

Paperwork & meetings are time consuming
Your time is valuable. If you’re a small business owner, chances are you have very little time in the day to get everything done. Therefore, you should make the most of your time. Prioritize your tasks. Limit your meetings. Another valuable tip: Never let a piece of paper touch your desk more than once. If it’s important enough, file it or record it somewhere. Otherwise, shred it or throw it away. Clutter is a time waster, too.

How much do you really need?
Look for ways to save money by evaluating your overhead. Are you leasing a space that’s too big (and therefore more expensive)? Can you cut back on supplies and travel? Can some positions be eliminated? Is expansion necessary right now? Some of these are hard choices to make, but the goal is to have enough reserves on hand to survive difficult economic times. Set weekly, monthly and yearly goals, and work with your accountant and other top managers to stay on track.

Coach the coaches
In sports, the head coach often spends time coaching the assistant coaches so that he or she can focus on the big picture while letting the assistant coaches work with the players. The same holds for business owners. Thoroughly training your managers will allow you to delegate while also instilling trust that the job can still get done when you’re not there.

The Importance of Accurate Accounting

Are you aware of all the current and new tax laws and regulations? Are you keeping up with currency fluctuations with our neighbours to the south? How is the stock market impacting your business? Today’s small business owner has to wear many hats, and the same can be said of small business accountants.

Gone are the days when their only tasks were keeping up with tax returns and tracking where a company’s money was going. Today’s small business accountant has to sift through a maze of ever-changing rules and regulations while maintaining an accurate paper trail in the event of an audit. In other words, a good accountant is far more than a “bean counter.” Think of a good accountant as a trusted business advisor.

Pay Attention to Detail
Accuracy and attention to detail should be priority No. 1, especially for small business accountants who are responsible for recording, reviewing and auditing all of a company’s finances. The savvy accountant should also keep up with all the latest accounting software to ensure accuracy. The penalty for failing to keep track of your finances goes far beyond an audit; accurate accounting can make the difference between whether a small business survives or thrives.

Partnership with Common Goals
Where do you see your business in five years from now? Ten years? Today’s accountant will work with you on your goals and hold you accountable by creating, and executing, a sound business plan. After all, no one knows your company’s finances better than you and your accountant. Communication between you and your accountant, therefore, is vital to your company’s future.

Keeping your goals in mind coupled with attention to detail will provide more accurate accounting results for your business.  At Five Star Accounting, we are more than accountants and bookkeepers.  We use our business expertise, combined with our accounting backgrounds to help you achieve your goals for your small business.

We are a Better Solution for Small Businesses

At Five Star Accounting, we understand the importance of time to a small business owner. That’s why we want to work with you so that you can maximize the use of your time.  We take care of your accounting and bookkeeping so you can focus on your business.  We have a dedicated team of accounting specialists that work closely with you and learn the operations of your business.  The result is an accounting solution that is tailored to your needs.  Contact us today to find out whether you would benefit from Five Star services.

Welcome to Our New Site!

Since its founding, Hospitality Solutions Inc has gone through significant change and growth.  From our humble beginnings serving the hospitality industry, we have come a long way.  To keep up with the natural growth of our company, we are proud to announce that Hospitality Solutions Inc. has become Five Star Accounting Inc. to better represent our client’s businesses and their unique needs.

Five Star Accounting has become one of Winnipeg’s top outsourced accounting and bookkeeping services.  We have the tools and expertise to offer tailored accounting solutions for small businesses.  We understand the constraints and limitations of a small business, while at the same time recognizing the tremendous growth opportunity of each of our clients.  When your business grows and your needs change, we grow along with you.