Watch out for Lenders who ask for a Fee Upfront

By Randall Orser | Small Business

If the pandemic has left you in financial difficulties and you are considering taking out a loan there is some  important information that you should know about advance fee loans. Upfront fees on loans are illegal - If you have bad credit and a loan broker offers to secure a loan for you for a $50 upfront fee, it is illegal for a company to do that according to the Canadian Anti-Fraud Centre.  

The Financial Consumer Agency of Canada has some tips about advance fee loans and some red flags to look out for.

  • Don't pay upfront, legitimate lenders do not usually ask for advance fees.
  • Don't fall for promises that you will get a loan regardless of your credit problems.  If you have a poor credit history then it is unlikely that you will secure a loan without paying large fees.
  • Be careful about emails offering you a loan - they are usually scams.

If you have taken out a loan, paid fees upfront and believe that you might have been scammed you need to report it to your local police or contacting the Canadian Anti-Fraud Centre.

From an article by Consumer Protection BC

Working from home? Canadians may get a $400 Tax Deduction

By Randall Orser | Employees , Personal Finances , Personal Income Tax

In early December 2020 in a proposal announced by the Federal Government the CRA would allow employees working from home due to Covid-19 to claim up to $400 in modest expenses without questions.

For many of us, working from home has become the norm and it is likely to stay that way for a while if not become a permanent reality.  For many us it means working on the kitchen table, in the dining room or wherever you can set up office space, but wherever it is there is a good chance that your bills have increased.  For those people who usually work from home in their home office, deducting home expenses on their tax return is the norm, but with so many more people working in their spare room or basement the federal government is looking at ways to simplify the process of claiming expenses.

Currently salaried employees who work more than 50% of the time from home are currently eligible to deduct part of the expenses related to their workspace such as electricity, heating and maintenance as a work-space-in-the-home-expense.  

The proposal that the CRA would allow a $400 claim for modest expenses was In the government's Fall Economic Statement for 2020 released November 30th, and would help taxpayers to access the deductions they are entitled to receive while simplifying the tax filing process. It means that employees can generally avoid the T2200 form that their employer would normally complete to tell the CRA that the employee has incurred mandatory expenses while working from home.  

More information on this proposal is expected in the coming weeks.

From an article by Stefan Labbe

Stay Alert and Recognize Signs that your Business may be in Trouble

By Randall Orser | Budget , Business , Small Business

As a business owner closing your company can be one of the hardest things you ever have to do.  But especially in these financially difficult times it is important that you recognize the signs of trouble early and prepare to deal with these difficulties early. Here are some red flags that can indicate that it is time to consider your options and what these may be:

1.  Dwindling Cash Flow - a shrinking cash flow is the most important factor that determines if a business is failing.  Financial experts say that having a cash reserve and a 13-14 week projection of future cash flow is critical to the business.  The covid-19 crisis has shown that many businesses did not have savings for a rainy day but were basically living from one payroll and rent payment to the next.  In addition many of the both large and small businesses that have filed for bankruptcy or a Companies Creditors Arrangement Act in the past few months were already financially distressed long before the pandemic started.   Many familiar companies are working with their lenders and advisers and considering restructuring to determine if they can continue to operate as a going concern.  

2.  Leaning on subsidies vs strategy - Do not rely on government subsidies to keep your business open.  There are over 300 different programs available federal, provincial and municipal and all require different guarantees, covenants and future repayment commitments.  Qualifying for subsidies may be just delaying the inevitable instead they should be used to help you to carry on with your business without this extra support.

3  Pressure from Suppliers - When the income flow slows companies are forced to extend their payables and manage their cash flows.  However if your unpaid bills are piling up and your suppliers make you pay COD or cut you off this is a serious sign that your payables have stretched as far as they can go. This may have been the situation for many businesses prior to the pandemic and it may quite likely be the same once the pandemic is over if your cash flow has not increased.

4.  Support from Lenders - If you have a bank loan or secured creditors that have taken assets as collateral you will need to generate enough positive cash flow to keep them happy.  If that is not possible even though your bank has eased restrictions and is offering an interest only loan then it is time to say that you are done.

5. Commitment to using your personal wealth - Many small business owners put their personal wealth on the line to finance their business so if they run into cash flow problems they have to decide how much more of their personal wealth do they want to commit to the business.  Even though entrepreneurs are usually optimistic, in this current climate they need to take a hard look and decide if their business is still viable.  

Even if you are seeing an number of warning signs the solution is not always bankruptcy.  It is a good idea to consult an insolvency professional as soon as financial problems are anticipated.  They will help you to explore all your options before closing the business which could include, finding an acquisition partner, forming a strategic alliance leading to a merger, or filing a holding proposal under the Bankruptcy and Insolvency Act.  In this situation your existing creditors are held in abeyance until you are able to put together a plan to sell your assets, or change your business model to become able to repay your creditors in the future.

From an article by Margaret Craig-Bourdin

Incentives are Key During Salary Freezes

By Randall Orser | Budget , Employees , Small Business

As companies are struggling to survive under the grip of Covid-19 employee salaries have been mostly frozen and instead of pay increases different ways have to be found to keep employees motivated.   Companies are currently conservative with their profit projections and approach to changes hence the salary freezes.  In 2020 more than 36% of Canadian organizations froze salaries in 2020 compared to the pre-covid forecast of only 2%.  This trend will probably continue into 2021 as 46% of employers expect to freeze salaries in 2021.

As most companies are conserving cash and not increasing wages here are three ways that they can mitigate repercussions on business performance and employee engagement.

1.  Offer Incentives such as flexible work hours, extra vacation days, training opportunities and employee assistance programs.  This will deter talent from seeing new opportunities and encourage loyalty and promote the notion of teamwork and that the company will succeed if everyone works together to move the company forward.

2.  Communicate clearly with employees so that they are clear about the reason for the salary freeze, how long it will be in place and how it will affect their workforce.  Communications with employees should be on a regular basis especially with employees who are working remotely.  This helps employees to feel less isolated and increases transparency so that they know what is happening with the company so that there are no surprises.  

3.  Companies that do not keep up with salary increases run the risk of losing their talent to the competition.  Businesses able to increase salaries are going to try and attract the best talent and that will impact organizations that have to freeze or roll back salaries.   Pandemic support such as the Canada Emergency Wage Subsidy have enabled companies to furlough or give a temporary leave of absence that will keep employees in their jobs.  They can return to work instead of being laid off ensuring that talent is not lost and the employee will have a job despite the bleak labour market.

According to a survey by Morneau Shepell 76% of employers have reported that covid-19 has negatively affected their bottom line and in 2021 salary increases are going to be dependant upon how quickly these businesses can recover.

From an article by Sophie Nicholls Jones 

What can we do to Revive the Economy?

By Randall Orser | Business , Covid-19 , Investments , Personal Finances

Canada's financial experts are looking into their crystal balls and predicting what the future might hold for the Canadian economy and how it could rebound post-covid.  Until March 2020 our economy seemed stable and secure despite other world events and trade wars we had reliable growth, strong employment, steady interest rates and cities were booming.  Then the pandemic hit and the world closed down.  

The government issued massive wage and unemployment subsidies and our deficit ballooned.  One million jobs were lost resulting in 13.7% unemployment the highest that Canada has seen since the Great Depression.  The pandemic also brought to light many problems in our society that we had been largely ignoring such as massive inequality, gaps in social assistance and vulnerable supply chains.  

Vaccinations have now arrived and we can see some light at the end of the tunnel and the question is now, what will our economy look like when the dust has settled?  Here are some predictions from financial experts.

1.  "Wage subsidies will help to save retail businesses" - until most people are vaccinated there will be sporadic shut downs so continuing with wage subsidies will help to keep businesses from going under. Pedro Antunes - chief economist, Conference Board of Canada

2.  "Small businesses will need more than government loans to survive and workers will need more support." Werner Antweiler - associate professor, Sauder School of Business

3.  "Businesses will need better access to rent relief, the current government has been a failure so more help is needed."  Laura Jones - executive vice president and chief strategic officer, Canadian Federation of Independent Business

4.  "Employers need to adopt flexibility for their workers to encourage them to grow resulting in better productivity and morale."  Jean McClellan, national consulting people and organization leader, PwC Canada

5.  "Automation will replace millions of jobs - and that's not necessarily a bad thing".  Companies investing in training for their existing workforces will help to sustain livelihoods without major disruption. Linda Nazareth, senior fellow for economics and population change, the Macdonald-Laurier Institute.

6.  " Business travel will come back safer though it will probably take three years or more to return to normal levels of business travel."  Nancy Tudorache, regional vice-president, Canada, at the Global Business Travel Association.

From an article by Ali Amad

Personal Finance Resolutions for 2021

By Randall Orser | Budget , Happy New Year , Investments , Personal Finances , Personal Income Tax , Retirement

As 2020 disappears into our rear view mirror and 2021 is upon us once again it is time to think about  our financial New Year's Resolutions.  As always it is best not to be too ambitious with your financial plans for the new year or you might be unable to stick to them.  Instead take a realistic look at your current financial situation and focus on quick and easy ways to manage personal finance tasks that will help you this year and in the future.  Here are some things to consider:

Top up your Emergency Fund - Financial experts recommend setting money aside for emergencies but even so most of us do not have an emergency fund.  Many people will have dipped into their emergency fund during 2020 so now is a good time to start rebuilding it if you are able to.  You should aim to have enough to cover your expenses for 3 to 6 months should you lose your job, enough to cover unexpected vehicle repairs, house repairs or medical expenses.

Contribute to your RRSP - This is a good time to open a RRSP if you don't yet have one.  If you regularly contribute perhaps you can increase your contribution in 2021 if you have enough room without over contributing.  

Sign up for Automatic Bill Payments - This will help you to not miss payments on your bills.  Include a minimum payment on your credit card which will avoid late payment fees.  Consider an automatic payment to your savings account from each pay check, what you don't have you don't miss!  It is usually easy to set up automatic payments on your bank's website.

Switch from a Bank that Charges Monthly fees to one with no Monthly Fees - There are many banks and credit unions out there that do not charge monthly fees for regular personal banking transactions.  Switching your account could save you at least $100 a year and maybe more.  If you don't want to change banks ask if your current one will waive your monthly fees.

Make Calls and Lower your Payments - It could be worth spending time calling your service providers especially for internet and cable to see if there is a way to reduce your monthly rates.   You should also look into the interest rates that you are paying on your credit cards and think about changing to a card with lower fees or cash back.  As most of us are not travelling at present it might be a good idea to get rid of your travel points credit card with it's high fees and change it to a regular card with a lower rate.  You could also try and negotiate a lower rate with your credit card company.

Update your Beneficiaries - Have you reviewed your will lately? This is a good time to make updates to your beneficiaries or any other information as your circumstances may have changed.

Check your Credit Report - Make sure that your credit report does not contain any errors or charges relating to identity theft as your credit score will affect your ability to get loans or lower rates on your credit cards.

Change your Passwords - It's a new year and time to change those passwords especially for your bank account and credit cards.  You should be doing this every three months but at least once a year will help to avoid identity theft.

Do a Subscription Audit - Take a look at your monthly subscriptions for streaming tv services, apps, news providers etc.  How many of these do you actually use?  If you have not used it for a while and don't intend to use it in the foreseeable future then deactivate it.  You can always reactivate it later if you need to.

Tweak your Budget - Though setting a budget can be intimidating it will help you to keep track of your spending.  If you are working from home and not spending money on Starbucks and lunches perhaps you could put that money into your savings account?

From an article by Mike Winters

Online Holiday Sales Expected to Surge by 90% in 2020

By Randall Orser | Business , holiday season , online shopping , Small Business

Shopping in this 2020 holiday season is going to look unlike anything we have ever seen before as 30% of shoppers will be buying their gifts online.  This will cause a shift in what is known as the seasonal rush as couriers, delivery services and Canada Post rush to deliver parcels.  A huge surge in online shopping occurred almost overnight starting back in March as shops closed due to the pandemic.  Digital sales saw a five year acceleration in just a few months trigged by this change in shopping habits and the retail industry will see a 15% market share which took 30 years to reach explode to at least 30% by the end of the year.

As more people are choosing to shop from home the main driver of these online sales will be social media direct advertising.  At least 15% of purchases will be referred to company websites from social channels especially in the height of the season and almost one in ten online purchases will be made directly through digital purchase points on social media.  The digital e-commerce demand is so strong this year that experts predict that companies offering personalized and curb side pick up options will increase their digital sales by 90% in 2020.

The anticipated volume of parcels to be delivered prompted Canada Post to release a video asking consumers to shop early to help to alleviate the backlog for their workers and to ensure packages were delivered on time.  On December 14th alone, Canada Post delivered half a million parcels.  They are adding more than 4,000 temporary seasonal workers and increasing their fleet by more than 1,000 vehicles.  There will be weekend deliveries and additional pick up points and post office hours will be extended.  Additional processing equipment has been installed along with enhanced tracking technology to enable customers to track packages. Despite these measures up to 70 million gifts could be delivered late.   

Many larger retailers have set up their own delivery services or teamed up with mail carriers and couriers to delivery purchases to customers.  Many are offering national two day shipping and next day delivery in major cities and in additions some started their holiday events early offering shopping with strict social distancing measures, online shopping with curb side pick up or home delivery.  

In order to have a successful holiday season retailers have had to change the ways that they do business to include more personal services such as the ability to chat on line with a store associate. Offering free shipping often with a dollar amount of purchases is always a bonus to attract a customer and have them buy more to get free shipping.

From an article by Michelle Singerman

Tips to Avoid the Post-Holiday Finance Blues

By Randall Orser | Budget , holiday season , online shopping , Personal Finances

Every holiday season we try to resist the temptation to overspend, but for those of us who are not successful, we have to deal with the post-holiday finance blues when the credit card bills arrive in January.  2020 has been a difficult year for all of us especially financially so this season it is important more than ever to stay within our budget.  Here are some ideas that might help you to keep your spending in line.

1. Pause before you act - remember last year and how long it took you to pay off those credit cards?  This year instead of splurging too much on gifts for your family and friends, consider making home made gifts, they are often more appreciated.

2. Set a budget and stick to it - according to the annual Holiday Spending Survey by the CPA only 39% of Canadians save all year for their holiday purchases.  Maybe you should consider doing this for Christmas 2021 but in the meantime make a sensible budget for gifts and food and stay to it.  Due to the pandemic it is expected that people will spend less in 2020 as they will not be going to parties and travelling, even so it will be easy to overspend on making your Christmas at home memorable.

3. Avoid credit at all costs - Most of us get a rude awakening in January when those credit card bills arrive especially those with high interest rates.  Even though stores may be offering you a discount on purchases remember if you have to pay high interest rates on their credit cards that discount can quickly disappear if you do not pay off your bill in full.  

4. Think about an app to track your spending - tracking your spending is essential to prevent going over your budget.  Even if you have set a limit it is so easy to overspend on gifts and and all the frills for an enjoyable holiday.

5. Be creative and responsible - People you care about do not want you to go into debt to give them gifts.  Instead overspending on gifts think about what you can do for them which may mean a whole lot more, such as babysitting, making them meals or treats, help with minor repairs or just spending time with them. 

6. Give younger kids experiences not stuff - Instead of giving them lots of toys that they easily become bored with, how about signing them up for sports, or giving them event tickets to use when the pandemic is over?  

7. Resist those Boxing Day sales - Shopping on Boxing Day is a bargain hunter's dream, but in reality many items can be found cheaper at other times of the year.  You need to have amazing willpower not to impulse buy even online.  This year most of us will not be going to the mall and the good thing about online purchasing is that you can do your research for the best price, and really think about whether or not you really need to buy the item at all. 

From an article by Mathieu de Larjartre

Canadians Plan to Spend Most of Their Seasonal Budget on Gifts

By Randall Orser | Budget , holiday season , Personal Finances

A 2020 holiday spending study by CPA Canada has shown that despite the pandemic shoppers have managed to save money for holiday gifts, and most people will be spending $588 this year compared to $583 in 2019.  In a normal year most people would be busy making lists and planning celebrations but this is far from a normal year and even though Covid-19 continues to ravage the economy most people have managed to set money aside for gifts even if they cannot celebrate with work colleagues friends and loved ones.

People will spend the most on gifts this year - To try and make up for this difficult year and treat themselves people will spend money on electronics, furniture and beauty products.  Old fashioned gifts such as board games will be popular as people will be stuck at home. 

Spending on entertainment will be down - The survey showed that 13% of respondents planned to spend nothing at all on entertainment outside of the home, and those who are venturing out plan to spend less than $200.  The usual Christmas socializing will not be happening, no corporate or personal Christmas parties, so there will be no temptation to overspend, for example on fancy clothing.  

There will be a lot less travelling - Travel is expected to take a big hit, over a third of respondents to the survey said they would not be spending anything on travel, 38% will be spending less than $200.  Travel can be a big expense for families at Christmas but most will be staying close to home this holiday season.

In person shopping will be down - Only 30% of respondents to the survey planned to shop in bricks and mortar stores and will be shifting to online options.  One in three people will be doing the majority of their shopping online compared to one in five in 2019.  Rushing around crowded malls to do last minute shopping will not happen for most shoppers this year, instead they have to plan their shopping online early in order to get  deliveries in time for Christmas.

It's ok to treat yourself - Financial experts say that Canadians should not be too concerned about treating themselves this Christmas as long as they do not go too far overboard.  After a tough year everyone should enjoy themselves at Christmas.

From an article by Margaret Craig-Bourbon

How to be a Smarter Online Shopper

By Randall Orser | Covid-19 , holiday season , online shopping , Scams

Due to the pandemic many of us have moved our shopping online. Sales online have soared in 2020 and they are expected to beat previous records during the holiday season. Most of us are buying from reputable sources that we are familiar with for groceries, electronics, clothing and much more. But as Christmas comes around we might be searching a little wider afield for that perfect gift and buying from vendors that we are not familiar with. You need to be smart when placing that online order to make it a safe experience and avoid potential issue. Here are some suggestions to keep in mind:

1. Read Reviews - Do your research and make sure that your vendor has a good reputation and has reviews that are genuine and are from verified buyers. Check for negative reviews especially from multiple people and how the company responds to them. Be careful to trust reviews that seem over exaggerated they may be fake.

2.  Beware of Red Flags

  • If the site looks unprofessional or is missing important information you could be dealing with a sketchy company which could put you at risk. Important things to look for are contact information, an actual address, phone number and email address.  
  • If the site is poorly designed with many spelling mistakes, bad grammar or broken links.  
  • If the back button does not work and you are stuck on a page, this could be a sign that the site is not legitimate.  
  • The site asks for your credit card information early on, you should not be asked for this until you are ready to finalize the purchase.

3.  Read the Fine Print about returns and refunds.  In BC there are not laws that deal directly with refund, exchange and return policies so retailers can set their own policies for customer returns and they can differ widely. This is especially true during the pandemic where some stores have changed their policies to reduce the risk of infection for customers and staff.  Make sure you read the fine print and know what you are agreeing up.

4.  Confirming your purchase - Before you confirm your purchase, make sure you see the following things:

  • A detailed description of the goods or services
  • The currency
  • The delivery details, including the shipping method and details of delivery
  • The cancellation, return, exchange and refund policies if any.

5. Know your rights should your purchase not arrive - Again due to the pandemic receiving orders can take longer than normal especially if buying from overseas. It is annoying when your purchase does not arrive, you may be able to get some help under BC law, check out How to get a refund if your online order never arrives

6.  Know what you can do when there is an issue with quality -  There are many funny posts on the internet about products bought on line not being exactly as advertised but it might not be amusing when it happens to you.  It is difficult to define a quality issue as everyone has different ideas of what they consider to be poor quality.  However if you are dissatisfied with a product you can read more about what your options are here.

Trust your gut, if a site appears dodgy then it probably is, look for a more reputable vendor and remember it is always good to support your local retailers as much as possible, during this pandemic they really need your help to survive.

From an article by Consumer Protection BC