Tag Archives: Resources for small business owners

Do You Know Your Accounting Policies and Procedures?

Do you know your businesses’ accounting policies and procedures?  Are they optimized for your specific type of business, and your operations individual needs?

If you were audited tomorrow, would your books stand up to Federal scrutiny?

Did you just break out in a cold sweat at the thought of a bunch of  “Revenooers” poring over your records, looking for inconsistencies?  If you did, it’s because you’re too busy running your business to spend your every waking moment fussing over your books.  Small businesses are the engine that drives the economy, but they are also the operations that are exposed to the greatest amount of risk.  As an entrepreneur, you are to be commended for your courage.  At Five Star Accounting, we completely understand the needs of small businesses in Winnipeg and Calgary.  We represent numerous small businesses in Winnipeg and Calgary.  We ourselves are a small business, with offices in (you guessed it) Winnipeg and Calgary.

Let our experience work for you.  We have the knowledge (kept current because we endeavor to be the best-educated accountants and bookkeepers you’ve ever met) and the experience to put your business finances in order.  We will help you set up a record keeping method that is easy to maintain, and that follows the best practices that we’ve established for all of our clients.  Once we’ve got you up and running, we’ll help you keep your accounting records up to date, so you can sleep comfortably at night knowing that your business’ books are completely in order.

We offer all the advantages of an in-house bookkeeper, without the added cost of another full-time employee.  For support with your accounting and bookkeeping needs, both in strategic planning and day-to-day support, contact Five Star Accounting, and experience our professional service and our personal touch.

What Revenue Level Dictates Outsourcing?

When will your business be making enough money to justify outsourcing some of the things you don’t want to do, or don’t do as well as someone more qualified could?

Our answer, when it comes to accounting and bookkeeping, is right from the get-go.  And we don’t say that just because we’re accountants and want to get paid.  We have years of experience in the small business marketplace.  We’ve seen firsthand the advantages that a small business that’s financially informed has, and we’ve also had to do some serious clean up work when we’ve gotten that call too late in the game.

Professional accountants have knowledge and tools that can make every stage of business growth easier.  We can do financial projections that can be instrumental in creating the initial business plan, and we can help when it comes to convincing lenders that your plan is solid.

Accountants know how to deal with the government.  In the start-up phase, you’ll be providing all kinds of compliance documents, which can be confusing and time-consuming for the uninitiated.  We spend a great deal of time learning how to navigate the legal landscape surrounding small businesses, and can put this knowledge to work for you.

Once your business is up and running, accounting and bookkeeping services will keep your cash flow flowing, your payroll paid, and your finger on the financial pulse of your business.  And, since you’ve outsourced the work, your hands will be free to do the thing you set out to do in the first place – build your business.

At Five Star Accounting, we know what it’s like being a small business in Winnipeg.  Besides fitting into that category ourselves, we have many years of experience in the field.  We know that the economy needs small businesses. Wherever you are in your business trajectory, from initial concept to full-blown operation, you can count on Five Star Accounting to provide professional accounting and bookkeeping support.  It’s never too early to get the help of a professional accountant, but it can be too late.

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.

Don’t Go Down in Flames! Avoiding Burnout in the Small Business

Wow! How did you forget to update the new maximum pensionable earnings amount in the payroll system effective January 1, 2012? Was it because you were too busy trying to catch up with the bookkeeping? And when did the mileage rate go up for employees using their personal vehicles to make business deliveries? Perhaps it was when you were driving around town to meet with potential clients, since business growth depends on your networking abilities.

If these scenarios sound familiar then you’re on the path to small business owner burnout. One of the first symptoms to appear is stress from filling multiple roles as owner, employee supervisor, customer service representative, bookkeeper, manager, purchasing director, marketing director, salesperson and human resources director. Another common symptom is important tasks not getting done in a timely manner or not getting done at all. For example, a frantic order is placed with a supplier – maybe not at the best price, either – because the business is about to run out of essential supplies.

The Business Finances – Get Reports Monthly not just Yearly!

As a small business owner, one of the most alarming symptoms is having no idea how the business is doing financially. Sure, you may keep a close eye on the bank balance but do you know if you were profitable over last quarter or even the last month? You need regular financial statements to help you navigate your business decisions. Perhaps they haven’t been printed because the accounting software needs updating, there’s a backlog of postings and account balancing to clear up, and you have no idea how to record the purchase of the new equipment as a depreciable asset. So unfortunately, you remain oblivious as to how your business is operating financially on a regular basis.  One of the first facts you need to realize as a small business owner is that buying accounting software doesn’t turn you into a bookkeeper or accountant. The power of the accounting software is often not even utilized by entrepreneurs because often they don’t know how to create and interpret management reports. These reports can help the business owner manage the business better, smarter and more efficiently.

Don’t Succumb to Wearing “Too Many Hats”

One danger sign of a business owner unable to manage business growth is when he or she believes no one else is qualified to do certain jobs. This individual then keeps taking on more and more work – wearing too many different hats. Instead of working smarter, the owner works harder and in the process falls behind. A better approach is to identify your strong skills and then determine the work that can be outsourced to professionals. Outsourcing your bookkeeping and accounting to a company such as Five Star Accounting is a good place to start because a professional can ensure the business records are kept current and that you have the financial information needed to grow the business. It’s hard to grow when you’re always looking back at work that should have been done already.

Five Star Accounting offers expertise in small business financial management.

The staff can assist by relieving you of the detailed recording and reporting, ensuring records are maintained according to accounting standards, preparing accurate financial and cash flow statements, and meeting government reporting requirements in a timely manner. Instead of counting receipts, you can spend your time strategically managing business growth and achieving financial goals. And who knows – you may just be able to make the next family birthday party or take a Sunday off to rest. The only flames you should be looking at are in the barbeque. Doesn’t that sound so much more delightful than burnout?

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.

CPP Changes for Retired Small Business Owners – What You Need to Know

Changes to the Canada Pension Plan could affect your or your employees’ early retirement plans. The government-run Canada Pension Plan, or CPP, allows working Canadians to receive a retirement benefit after paying into a pension plan. CPP also has a disability benefit and a death and survivor benefit.

Below are a few things you need to know about new CPP changes:

You May Have to Deduct Contributions
CPP has undergone some notable changes in recent years, including new regulations for those who want to start collecting early. The most recent change took effect Jan. 1, 2012. Employers were notified that companies must deduct CPP on pensionable earnings from employees 60 to 65 even if they are collecting CPP.

How it Affects Employees 65 to 70
Employers also must deduct contributions for all employees between the ages of 65 to 70 – unless the employee decides not to contribute to the plan and has filed the election to stop paying CPP Employees cannot contribute the month after turning 70.

Under the Microscope
The Canada Pension Plan has come under scrutiny in recent years as employees and employers alike try to make sure they receive adequate retirement incomes. Employees – especially those nearing retirement age – should check with their employers to see how the changes impact them, and small business accountants should work with their employer to review how the changes could impact both the work force and the company’s finances.

For more information, click here to be redirected to the Canadian Revenue Agency.

Prepping Your Books for a CA Review

No matter how well you or your bookkeeper stay on top of all your business’ expenses, there may come a day when one or more auditors from the Canada Revenue Agency come knocking on your door. But being audited can be a relatively straight-forward process if all the paperwork has been accounted for. Below are a few small business accounting practices that will help ensure the process goes smoothly.

When in Doubt, Keep It

If, for whatever reason, any of your receipts aren’t legible, then it’s not considered a supporting document, and you lose the deduction. You also lose the deduction if you can’t produce a receipt. Your claims will be matched with your receipts by an auditor. Bottom line: When in doubt, keep track of all your receipts.

What’s Acceptable?

Credit card statements, bank statements and cancelled cheques are required documentation but are not considered an acceptable form of verification in Canada. Instead, you’ll be asked to produce invoices, receipts and mileage records.

Keep Track of Mileage

Even if you drive your personal car for business, you’ll still want to keep a detailed daily mileage log book that includes the starting mileage, name of people or places you visited, and the ending mileage. Your log book should also include all original gas station receipts.

Who Did you go to Dinner With?

If you go out to eat or entertain a client, make sure you write their name on the back of your receipt. There are some instances where you can claim meal expenses by yourself, too, for example if you can show that you had to work out of town that day.

What if I work from Home?

You can claim a home office if you can show that you have an area dedicated for work and to meet clients. That area can’t be your bedroom, though; it has to be enclosed and furnished as an office.

These simple tips will ensure that your records are more accurate, making tax time simple and efficient.

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.

Value of Time: Making Good Use of Your Time as a Small Business Owner

Small businesses make up the backbone of the Canadian economy. Ninety-eight percent of all businesses in Canada are considered small, and those businesses account for almost half of the country’s labour force, according to Industry Canada. To keep up with the growing demand, small business owners need to be able to make the most of their time. Below are a few tips for small business owners.

Stay focused on what’s important
Pay attention to what drives sales. If 20 percent of your product accounts for 80 percent of your sales, then focus your energy on those products or services.  Similarly, spend time on activities that require your expertise.  Outsource activities like your bookkeeping to people that can do it better for you.  At Five Star Accounting, bookkeeping is our expertise and we can take care of your accounting needs so you can concentrate on your company.

Prioritize and meet deadlines
Work on the projects and activities in order of importance, then give yourself deadlines to complete each one. This helps keep you on track rather than getting slowed down by less important, time-killing activities.

Don’t wing it
Don’t start your day without a “to-do” list. Running a small business can be overwhelming, and it’s easy to get lost in interruptions and distractions. A “to-do” list will make sure you stick to your schedule, and it will help you prioritize.

Stick to your schedule
Once you’ve come up with a prioritized schedule, it’s important that you stick to your deadlines. The same goes for your employees. Missed deadlines are time wasters, because they push everything else back.

Keep your eye on the prize
Whether you’re the CEO of a Fortune 500 company or run a mom-and-pop diner, don’t lose sight of your goals. Are you looking to expand? Or are you simply trying to increase your earnings? Revisiting your goals each month will help you tweak them as necessary – and it serves as a reminder of why you started your business.