10 Reasons for Not Taking on the CRA Singlehandedly

By Randall Orser | Personal Income Tax

Business concept-piggy bank with glasses,calculator and a clock TNSooner or later, every tax payer may have to take on the CRA. It’s not just a matter of whether you are guilty of doing something wrong but, rather, whether tax laws change (and to what extent), whether the present administration wants to play hardball with suspected tax cheats, and whether your financial situation and reporting habits have undergone any major changes.

A number of errors (not reporting income, listing a dependent someone else also claimed, misusing deductions, etc.) and discrepancies can motivate the CRA to come after you. If this happens, you may be tempted (if you are convinced that you are innocent) to fight them on your own. Here are ten good reasons for not making this common but often costly mistake:

#1 You may unwittingly admit to a crime.

It does not matter whether you broke the law unknowingly or if you were trying to pull a fast one over the CRA. The CRA does not differentiate. Legally, anything you say to the CRA may be held against you, even if the CRA never read you your rights when you met with them or spoke with them over the phone. Sadly, many people end up being in hot water with the CRA not over anything they were suspected of doing but over what they admitted to during official communication with the CRA. With advice from a tax professional or attorney, you can sometimes sidestep legal land mines of this nature.

#2 You may bring to the CRA’s attention something that might have otherwise gone unnoticed.

Contrary to popular opinion, the CRA does not know everything about you; nor do they have a crystal ball that tells them about all the mistakes and omissions you have committed. Your best approach is to not provide any more information than is requested, being sure not to bring up any incident or fact that the CRA does not specifically bring up.

#3 You probably do not know enough about tax laws.

This means that you most probably do not know about your rights as a tax payer, what limitations have been imposed on the CRA, what you should say and not say, under what circumstances may certain information be requested (and how), and when you should refuse (if ever) answering specific questions.

#4 If alone, the CRA may see you as being more vulnerable, prompting them to possibly take advantage of you.

As a general rule, the CRA treats differently people who come in on their own from those who show up with legal counsel or with a tax professional.   Having a knowledgeable professional watching out for your interests will provide you with peace of mind and may compel the CRA to play by the book.

#5 You can’t take advantage of the special relationship that some tax advisors and attorneys have with CRA agents and supervisors.

In some instances, the person representing you may be able to smooth over an otherwise rough situation, simply by virtue of that special connection. This does not mean CRA agents will not do their job but well-connected attorneys may know what might be negotiable and forgivable and what would ultimately have to be taken to court. Sometimes, the CRA can be persuaded to settle a matter quietly, especially if a tax payer was treated unfairly or disrespectfully by an agent.

#6 If the matter has to go to court, you will not be in as good a position as an attorney to prepare for the event.

Every good attorney knows that every word uttered (orally or in writing) can play a crucial role later on; consequently, an attorney will not only document all meetings, but will also know what documents to subpoena (if necessary), whom to contact on your behalf, and how to bring together the most beneficial evidence.

#7 You may not realize that everything you say to the CRA can later be used against you.

Even if you realize this, you are probably not as well prepared as tax professionals to know what you should and what you should not say. Simply refusing to answer the CRA’s questions will only get you in hot water, unless you can preface the refusal with “Upon advice from legal counsel…“ The CRA may have good grounds for going after you but you have the right to not have to help them put the noose around your neck.

#8 CRA agents are notorious for sometimes misrepresenting, exaggerating, or even misinterpreting the facts surrounding a case.

This is especially true if an CRA agent has a vendetta against a tax payer, a certain ethnic group, or someone he/she is convinced is a liar or a crook. Tax professionals are probably better equipped to deal with these types of situations. A “personal” situation is more easily defused by someone who can objectively look at the facts, hopefully being not only your advocate but a cool-headed, objective professional.

#9 You may not be as adept as a lawyer when it comes to negotiating for a reduced tax-owed amount, a special, affordable payment plan, or no jail time (if a criminal act is suspected).

The fact is that many special deals are conceived of and proposed by attorneys and tax professionals, not by the CRA or taxpayers. Such “deals” can often greatly ameliorate otherwise egregious situations.

#10 Your dilemma may be resolved more quickly and with fewer long-term repercussions if a knowledgeable and well-connected tax professional is representing you.

Some CRA cases get drawn out for years, usually inflicting unnecessary stress and financial devastation upon the taxpayers involved. When you get someone to deal with the CRA, you may greatly reduce or eliminate this kind of stress and financial woe.

Are You Ready for the Unexpected?

By Randall Orser | Small Business

business growth TNThere have been many events and disasters over the last decade that have highlighted the need for business continuity and basic planning to assist in incident management and business recovery following events that have threatened to end business operations for good. Events and incidents like severe weather, natural disasters, terrorist attack or even just sickness, theft and vandalism can have devastating effects on business operations, making effective plans for dealing with their occurrence an essential consideration for every modern business.

The business world is networked and intertwined, with business being done across borders, time zones and currencies. Every business is in some way reliant upon the people it employs, the environment it operates within and the customers and partners it deals with. It’s imperative then that every business understands the impact of all manner of potential situations.

For many, business continuity is not regarded as a core business consideration. It’s seen as a subject that’s intrinsically linked to catastrophic events like floods or storm damage, fire damage or even terrorism, but business continuity needs to cover a much wider consideration. For many, their business insurance is what they believe they will fall back on if such events occur, but in practice this will only seek to pay out to a business that has already suffered and had to recover. Insurance is almost always of use after-the-fact and it provides little in the way of instant reaction to restore business operations.

While it’s important to have a plan around how you would recommence or restore operations if your business was attacked, flooded or burned down, you also need to be able to consider the impact of such events on your business if they actually happened to another company or set of individuals.

How would your company cope with a crisis-hit key supplier or an outbreak of disease? What if your building became unsafe for any reason? Could you recover the situation and maintain normal operations? How would your business cope with a major power failure in the local area? Could you continue with operations if the telecoms and IT connection to the world was lost for any significant period of time? For most businesses, such events could spell disaster; such is the modern reliance on services like power, telecoms and IT. It’s therefore imperative that any business continuity planning your business undertakes is capable of providing a plan for each eventuality that your business believes could threaten it’s effectiveness or existence.

The importance of business continuity planning cannot be understated, especially in the modern age of interconnected business and IT. An event on the other side of the world could affect your business tomorrow and you need to be ready to react. Business continuity planning will never give you step by step instructions for every different risk that your business is exposed to, but it can help establish a broad set of preparatory steps and actions that you know will be effective in a number of situations allowing you to react to the particular event or situation much more quickly than if you had no plan at all.

What are Allowable Motor Vehicle Expenses as an Employee?

By Randall Orser | Personal Income Tax

racing piggyMany people who are employees may have to use their personal vehicle for work, such as contractors, salespeople, and more. Many times the people do not get any kind of allowance from the employer for the use of their personal vehicle.

Sometimes the employer may reimburse them through either an allowance (which is a taxable benefit), or based on per kilometer driven for work. Whether an allowance or per kilometer basis, sometimes the amount received doesn’t cover the actual amount spent, so you can deduct the actual expenses earned less the amount received.

You can deduct your motor vehicle expenses if you meet all of the following conditions:

  • You were normally required to work away from your employer’s place of business or in different places.
  • Under your contract of employment, you had to pay your own motor vehicle expenses.
  • You did not receive a non-taxable allowance for motor vehicle expenses; or, the allowance is unreasonably low.
  • You keep with your records a copy of Form T2200, Declaration of Conditions of Employment, which has been completed and signed by your employer.

The types of expenses you can deduct include:

  • fuel (gasoline, propane, oil);
  • maintenance and repairs;
  • insurance;
  • licence and registration fees;
  • capital cost allowance (though not recommended as it may trigger a gain if the vehicle is sold);
  • eligible interest you paid on a loan used to buy the motor vehicle (max $10 per day for vehicles bought after 2002); and
  • eligible leasing costs (amount limited based on a vehicle cost).

If you use a motor vehicle for both employment and personal use, you can deduct only the percentage of expenses related to earning income. To support the amount, you can deduct, keep a record of both the total kilometers you drove and the kilometers you drove to earn employment income. Canada Revenue Agency considers driving back and forth between home and work as personal use.

If you use more than one motor vehicle to earn employment income, calculate each vehicle’s expenses separately.

When you file your taxes, you enter these amounts in the Calculation of Allowable Motor Vehicle Expenses area on Form T777, Statement of Employment Expenses, and attach it to your paper return. If you file electronically, CRA doesn’t get this statement just the amount on Line 229.

As with any tax deduction, keep all your receipts, including payments from your employer for an allowance, and keep a log book of your kilometers driven for work related activities.

You Must Include These 10 Essential Elements in Your Business Plan

By Randall Orser | Small Business

Business Plan Puzzle TNWriting a business plan can be a daunting experience for anyone who has never done it before but it needn’t be so. For most people it’s actually the thought of having their plan rejected by investors or the bank that makes them nervous about writing one. The very process of writing a business plan should be what gives you confidence that you either have a viable proposition or not.

By working your way towards a comprehensive business plan, you’ll answer most, if not all, of the questions that potential investors will ask. The key to success is in making sure you know what questions will be asked so you can have your answer and proposal ready.

A business plan is a document that you will use for a number of purposes. Primarily, it’s to record your idea and business proposal, but it’s also a tool to use to convince investors and stakeholders that you know what you’re doing and that they should trust you and your plan for the business.

There are therefore a number of key elements that any business plan will need to address. You can choose in which order they appear in your plan, but you should make sure you cover all of them.

The nature of your business

The first thing you’ll need to be able to do, even before you set pen to paper, is describe what your business is being set up to do. If it’s based upon a product or a service, can you describe that and can you say why your product or service has merit or is unique?

Your strategy and business aims

Describing what your business will do may be relatively easy, but ask yourself whether you can articulate the direction your business is heading in and what your aspirations are for the future. When laying out your business strategy, you will need to set it in the context of the market and environment around it, taking account of influencing factors and dependencies. Potential investors will want to know what you are planning for in the future, what the future direction of the business will be and ultimately what you intend to achieve.

The market

Every business sits within a market. Whether it’s your customer base or your competitors that represent your biggest challenge or opportunity, you need to be able to articulate where your business will sit and fit in the marketplace.

Your plan should discuss the sector that you will operate in, the demand for your product or service and where your business will sit in relation to customers and competitors. How strong are you or your products in comparison to those of the competition? Will you be able to carve out a market share? If so, how and why?

It’s vital to deal with how you will promote your business within your chosen market. Make sure you can describe what your marketing approach will be and that you demonstrate your understanding of routes to that market as well as areas for potential growth.


From where will the business get its money? Not the investment money to get moving, but the day to day sales revenue, the life-blood of the business.

When discussing revenue in the plan, you should consider where the money will come from. Is it through sales of products and services or are you expecting to rely on some other earning stream? How much are you expecting to receive either annually, monthly or even weekly and what do you see the growth of revenue being over time?

To make your information easy to understand, use graphs and charts as well the more established accountancy table formats. This lets the reader see your estimations quickly without having to wade through text to get a feel for your overall forecast.

Cost Base

Before you can predict profit in any way based on the revenue you described, you will have to work out what it is going to cost you to run the business. Your business’s cost base is the normal expected cost of running the operation. It’s not about the amount of money you need to get started. You can cover that elsewhere in the plan.

Make sure you look at the cost of accommodation, salaries for any staff you may have, utilities costs and the costs of raw materials or goods you may be purchasing on a regular basis. Make sure you lay this information out in a way that can be easily understood and always check your assumptions.

If you are heavily reliant on manpower, make your staff levels clear and show how they will grow with time. It’s also a good idea to spend give a brief outline of the roles you envisage being needed and what skills they will require.


This is the amount of money, or capital, that your business will need injected into it to get off the ground or to expand. Potential investors will want to know how much money is needed and for how long you will need it. What is equally important, but often missed in business plans, is what you will do with that money and what impact you expect it to have on the business. Consider very carefully what you will do with the investment you are asking others to make and ask yourself if they will understand your strategy and agree with your approach.

You can also consider splitting the investment requirements to reflect what you need in the short term to achieve some initial goals and what you will need for the longer term to meet strategic aims. This gives investors an indication of your level of foresight and your ability to set long term, achievable goals for your business.

Profit and return on investment

If you are asking people or institutions to invest money in your business venture, you will have to be able to tell them what they will receive in return. At a basic level, this will be a description and an estimation of what returns you will give them for what will effectively be the loan of their money.

Examine payback periods, particularly for initial investments and be clear about how long you think it will be before the investment breaks even and starts to make money for you and the investors. If the main purpose of your business plan is to attract private investment, rather than banking facilities, you may want to consider mentioning what other methods might be possible for return on the investments made. This could include taking a share in the business or profit-taking after a set period for example.

Take your revenue and costbase estimations into account and forecast the profit levels your business might make over the period of your plan. Bear in mind that for new businesses, profits may not be available immediately and getting the business into a profitable state may take time. If this is the case for your business, try to be as clear as possible on how long this might take and on what it may depend.


Many a sound business has gone to the wall through cashflow problems. It’s one of the fundamental issues that faces every business and must be addressed in a business plan. If need be, get some help from an accountant to estimate cashflow and get advice on how to present it in your plan. If you try to produce a business plan that does not sufficiently address cashflow, it’s almost certain that you will be turned down for investment of any kind. The main points you will need to consider from an investor’s point of view will be the maximum cash exposure, so that you can see the maximum amount you are likely to be out of pocket at any point in time, and for how long will this exposure last.


Few businesses, if any, are risk free. If someone tells you they have a no-risk business proposition, it’s more than likely that they’re either lying or just haven’t considered where the risks actually lie. Don’t expect potential investors to fall for the no-risk argument. Think about the things that could impact your business. What are the factors or events that would cause your business to fail or be held back in some way? List them along with an indication of the probability of them actually occurring. Beside each risk describe actions that can be taken to mitigate the risk either completely or partially. Where these mitigation actions have costs, estimate them. You should also consider what you will do if the risk occurs. This is common project management practice and is known as the fallback position. Since launching or developing your business is a project, it makes sense to use project management techniques. Again, where these fallback actions have costs associated, state what they are.

Management capability and background

Lastly, investors will want to know who is running the business and what it is that makes them the right person to do so. If it’s you who will be running the business, include your resume, or CV, and explain why you are the right person with the right skills and experience. Investors will want to establish the credentials of whoever will be managing their investment.

There are lots of other elements of a business plan that help to ensure it’s a comprehensive document that shows your business proposition in the best light possible, but these ten are absolutely essential. If you cover these, you’ll be well on the way to having a plan that covers every point investors could want to query.

How Can You Benefit From The Home Buyers Amount?

By Randall Orser | Personal Income Tax

moving-tnYou can claim an amount of $5,000 for the purchase of a qualifying home acquired in 2014, if both of the following apply:

  • you or your spouse or common-law partner acquired a qualifying home; and
  • you did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years (first-time home buyer).

Qualifying home

A qualifying home must be registered in your and/or your spouse’s or common-law partner’s name in accordance with the applicable land registration system, and it must be located in Canada. It includes existing homes and homes under construction.

The following are considered qualifying homes:

  • single-family houses;
  • semi-detached houses;
  • townhouses;
  • mobile homes;
  • condominium units; and
  • apartments in duplexes, triplexes, fourplexes, or apartment buildings.

A share in a co-operative housing corporation that entitles you to own and gives you an equity interest in a housing unit located in Canada also qualifies. However, a share that only gives you the right to tenancy in the housing unit does not qualify.

Persons with disabilities

You do not have to be a first-time home buyer if:

  • you are eligible for the disability tax credit; or
  • you acquired the home for the benefit of a related person who is eligible for the disability tax credit.

The purchase must be made to allow the person with the disability to live in a home that is more accessible or better suited to the needs of that person. For the purposes of the home buyers’ amount, a person with a disability is a person who is eligible for a disability tax credit for the year in which the home is acquired, or a person who would be entitled to claim the disability amount if they did not claim costs for attendant care or care in a nursing home on lines 330 or 331.

You must intend to occupy the home or you must intend that the related person with a disability occupy the home as a principal place of residence no later than one year after it is acquired.

Completing your tax return

Enter $5,000 on line 369 of your Schedule 1, Federal Tax. You and your spouse or common-law partner can split the claim, but the combined total cannot exceed $5,000. When more than one person is entitled to the amount (for example, when two people jointly buy a home), the total of all amounts claimed cannot exceed $5,000.

If you are filing electronically or a paper return, keep all your documents in case CRA asks to see them at a later date.

Automate Your Business to Grow!

By Randall Orser | Small Business

Business concept TNMention “business process automation” and for most people, it’s the complex IT systems of the bigger business establishments that first come to mind. Yet the smaller businesses, even the start-ups and home-based enterprises, can make use of and benefit from business process automation. Number Crunchers® is going through this process right now. We’re looking at how we can get more efficient and productive using automation with a web-based software called Infusionsoft.

What is Business Process Automation?

Business process automation refers to the use of technology and software applications in operating a business. It is the complete or partial automation of repetitive tasks and regular business processes so that labour is better utilized and costs are contained.

Tools to automate a business are aplenty: tools for accounting, inventory tracking, email marketing, order taking, customer relations, and many more. A good example is the automation of inbound calls to a company. Do you remember years ago when a telephone operator was a must for most firms? These days, callers interact with a voice response system that takes care of standard calls or inquiries and routes specific calls to the right person or department.

Benefits of Automating Your Home Business

Automation has become necessary for businesses of all types and sizes. Consider the following benefits you are bound to gain by automating your business processes:

  1. Business process automation will save you time.

If you are a one-person operation, you can be freed from handling the everyday routine tasks and devote your time instead towards marketing and growing your home business.

  1. Business process automation will cut down your costs.

By automating many of your processes, you can streamline your operations so you will not need to hire as many employees as you would if your operations were run manually.

  1. Business process automation will minimize errors.

Human errors can be costly and can lead to financial losses or poor customer service. Automated accounting systems, for instance, guarantee accuracy in computations, ensure timeliness of sending billing statements and improve the efficiency of your inventory management.

  1. Business process automation will help you manage information better.

As business owner, you need to be informed about all aspects of your business operation. With automation, information is sorted, classified, and ready for your retrieval anytime you need it.

  1. Business process automation will facilitate communication.

With correct and timely information, you get to know exactly what your customers want. You can communicate directly with your customers to address their needs or resolve their problem with your product or service.

How You Can Automate Your Home Business

If you are not yet sure which of your business processes to automate and what automation tools to use, you may want to take stock of your various business processes and learn which can be automated. Make sure to break them down where needed so you can decide on the appropriate software or application.

Take for example your marketing process. You can break it down to the following tasks: generating leads, distributing marketing materials, sending out sales letters, following up on leads, conducting surveys, and gathering feedback. For lead generation, you can design your website to include a subscription form or an opt-in box where visitors can submit their contact information. The pooled data go to your mailing list, which you then feed to your email auto responder that will in turn generate automatic responses to the email inquiries or send out pre-scheduled messages, newsletters, or sales pitches to those in your customers’ list.

With the right apps on your website, you can engage in e-commerce and run your online store where everything is automated from the order taking to receipt of payment and processing of shipment. If you have affiliates or if you advertise on other websites, you can also monitor their performance using a tracking system. Your accounting system can incorporate bookkeeping, invoicing, inventory management, payroll, voucher preparation, and so forth.

In the end, it is a matter of identifying the unique needs of your business and choosing the appropriate business process automation tools. Depending on your budget and the degree of automation that you want, you can hire an IT professional to develop an automated system for you or you can purchase one of the many canned programs that are readily available. A few solutions that you can download for free are available if your needs are simple and your volume is low.

Uh, Oh! You’re Going to Be Filing Your Taxes Late!

By Randall Orser | Personal Income Tax

Tax time on the clock TNThere’s many times in our lives when we’re late for something, an appointment, dinner, and such. Your taxes are also something that you can also end up being late filing, however, it’s a bit more serious than missing an appointment.

Many people seem to be filing late because they’re going to owe the government money, and want to put off having to pay, as they don’t have the funds. That is probably the biggest mistake you can make. First, you actually may not end up owing the government based on different tax credits, and you may just be assuming you’re going to owe. Second, if you do end up owing then you will incur penalties and interest on the amount overdue, and not from the date you filed, but from the date the taxes were originally due.


If you have a balance owing for 2014, Canada Revenue Agency (CRA) will charge compound daily interest starting May 1, 2015, on any unpaid amounts owing for 2014. This includes any balance owing if CRA reassesses your return. In addition, CRA will charge you interest on the penalties starting the day after your return is due (generally May 1st). The rate of interest CRA charges can change every three months (as of this writing, it’s 5%). If you have amounts owing from previous years, CRA will continue to charge compound daily interest on those amounts. Payments you make are first applied to amounts owing from previous years.

Interest on unpaid taxes may be waived or cancelled under certain circumstances; such as, financial hardship.

Late-filing penalty

If you owe tax for 2014 and do not file your return for 2014 on time, CRA will charge you a late-filing penalty. The penalty is 5% of your 2014 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.

If you were charged a late-filing penalty on your return for 2011, 2012, or 2013 your late-filing penalty for 2014 may be 10% of your 2014 balance owing, plus 2% of your 2014 balance owing for each full month your return is late, to a maximum of 20 months.

If you failed to report an amount on your return for 2014, and you also failed to report an amount on your return for 2011, 2012, or 2013, you may have to pay a federal and provincial/territorial repeated failure to report income penalty. The federal and provincial/territorial penalties are each 10% of the amount that you failed to report on your return for 2014.

Note that if your balance owing in 2013 was more than $3,000 ($1,800 in Quebec), you were required to make installment payments. If you did not make those installments and owed more than $3,000 in 2014 then you will be charged a penalty and interest for not making those installments. Installment penalties and interest is calculated much differently than regular amounts owing, and I won’t go into those here. Check out Installment interest and penalty charges on CRA’s website.

Payment arrangements

A payment arrangement is an agreement that you can enter into with CRA, which allows you to make smaller payments over time until the entire debt is paid. If the CRA determines that you cannot pay your debt in full, we can work with you to develop a repayment plan. To help CRA determine your ability to pay, you may have to make full financial disclosure and give evidence of your income, expenses, assets, and liabilities either by telephone or by completing a financial questionnaire supplied to you by a collections officer.

You can also make payment arrangements through the My Account feature, and setup an automatically weekly, bi-weekly or monthly payment.

In the end, it is much better to file your taxes (and other remittances) on time, and then you can make payment arrangements with CRA. Will CRA always agree to what you are proposing for a payment arrangement? No, however, if you have proved that there is a financial burden with having to pay what they’re asking, they usually will agree. After all, they just want their money.

Tough Luck, You’re Not Going to Get Rich Quickly in Your New Business

By Randall Orser | Small Business

revamping-TNIn starting up your own business there are some things you must do if you want to succeed. If you go through these steps and decide at the end of it that you are not ready, you have saved yourself a lot of money and frustration. On the other hand, if you have all these answers and are still keen, you have a much better chance of making it work. There are a lot of people, self-help books and websites out there to assist.

The Business

  • Decide exactly what your business is to do. Are you selling products? Services? Consulting? Advisory? Buying? Define it in ten words or less. Then define your objective within ten words, e.g. ‘Be a world-leading producer of top class music recordings’. This is where your dream gets expressed and you should imagine the best results that you can.
  • What skills, qualifications and work experience do you bring to the business?   Having work experience in another business of the same type will give you a good start and enhance your chances of success. It will also inspire more confidence in your investors or bank that you know what you are doing.
  • Prepare your Business Plan. This includes everything about how you intend to achieve the objective. It is how you will make money with your business and how much over how long a period. It states how you are going to set the business up and what you will need to use (people, money, materials, time, machinery, etc), what risks you anticipate, what hurdles must be surmounted, and your best estimate of how much money you expect the business to spend and to bring in over the course of one, two, and three years. This is important for deciding a lot of these details for yourself but, if you wish to borrow money, a lender will also want a copy. It is proof that you have thought it through thoroughly and that it is feasible to expect to end up with more in receipts than payments. Wherever possible use lists to keep things succinct. Even if you think you are ‘no good at numbers’ you still need a plan. Just get on with writing down all the things you have worked out in your head or get help, but don’t just skip over it. The bank might be able to give you a template, or you could find one with a bit of research in the library or on the Internet.
  • You also need to put thought into ‘what if I succeed?’ What if the business is still running well next year? In five years? Are there any ongoing costs to take into account, e.g. maintenance or equipment replacement? A fun one is ‘what if I am a raging success?’, but it’s worth a thought about ‘get more staff, move premises, acquire more equipment’ or whatever would be needed if you got more work than you could handle. It will uncover any areas where a trap might loom.
  • If you’re going to be selling things, how are you going to buy or make whatever you will sell? If you are buying anything in, you will need a plan for purchasing, transport, quality control, delivery, payment, and storage. If you are making things, your supply plan will include raw materials and equipment and you will need a quality management plan. Don’t forget the insurance and maintenance plans for the equipment. You will also need a contingency plan; what if you can’t get your supplies or your equipment doesn’t arrive in time? There is a wealth of valuable advice available relating to supply, stock management, and storage (warehousing) that is worth looking at before you decide to jump in.
  • Are you hiring anyone? It is a good idea to already have 6-12 months wages in the bank. There are rules and regulations about hiring (and firing) and about maintaining a safe and healthy working environment, e.g. some jurisdictions require display of the Health & Safety Regulations in the workplace. You need to understand these requirements and be able to comply.
  • If you want a limited liability company, you will need to get your lawyer or accountant to set it up for you. Be prepared – a registered company has legal obligations, such as filing annual accounts with the Companies House. This will need an accountant and must be included in your budget. You are also obliged to keep accounts – a strict record of what goes out and what comes in. There are a number of small business accounting software packages on the market. It’s worth asking your accountant if he/she has a recommendation. For example, if they use software that will only need your backup copy for the accountant to do the annual accounts, it will save you a lot of time and hassle. But you will need to use that particular software to be able to do it that way.


  • You need money to start with. Where’s it coming from? Do you have enough savings, are you borrowing from the bank, or is someone else investing? How much money is enough is very dependent on what you are planning to do. If you can cover your first year of operation you are in a very good position, provided you expect to make more money during that time. If you are planning to borrow, you need to know exactly how much you require and how long you think it will take to repay. The lender will need to be convinced that you can make your proposed business idea work and have researched it and identified your market.
  • What’s your budget?   What income do you expect and what do you expect to pay out? Don’t forget the overheads like phone, broadband, rent, rates, electricity, water, cleaner, window cleaner, gardener, etc. You will need to include (and earn) some money to pay yourself a living wage, so this goes into the budget as well. Some banks offer a ‘new business’ package, which includes guidance on keeping your accounts. Break down the budget so you know how much income per month you need to earn in order to keep your head above water. It is also useful to develop a payments plan at the same time. This uses the same information as the budget but lists the payments that you expect to make each month. This will show the effect of the quarterly and annual payments on your bank balance and whether you will need to negotiate an overdraft facility to cover any difficult spots.
  • Who is going to do your accounts? You will need an accountant for the annual returns but what about the day-to-day bookkeeping? Some businesses simply record and collect all receipts and payments and hand the records to the accountant who then provides financial reports. Some hire a part-time bookkeeper that comes in once or more times a week just to do the bookkeeping. You can do it yourself and be more on top of the numbers, but the time you spend doing it is time spent away from earning money and doing the job that you love doing. A daily update of a small business accounting package is not hard, however, and will save you money if you can do it easily yourself.


  • Research your market. Are there enough people who want to buy what you are selling? Will they come back again or could you run out of customers in a year or two? Who are your likely customers – young people, middle-aged men, elderly folk, and other small businesses? The answers to these questions belong in your Marketing Plan along with the answers to the next question. This is another useful document for the bank, as part of your Business Plan.
  • Why should people buy what you are selling? Is it something they need (like care services, chiropractic services or shoes)? Is it the best quality on the market? Is it the only blue one in the world? You need to identify what makes your product or service special. This is your Unique Selling Point (or ‘USP’) and should be a part of any advertising you do.
  • What is your plan for telling the world about your business? People will not come through the door unless they know it’s there. Review every option you can find. Are you going to use Internet marketing? Are other people recommending you? If you are planning on an advertising campaign, it is very important to know how much it will cost, before you commit to it. Having identified your market (above), where will those people see your advertisement? Watch out for con artists who tell you they can earn you millions of pounds over the Internet with their ‘special software’ or similar. If you don’t understand exactly how it will work, you probably don’t want to get involved, however attractive the £ signs might appear. There are exceptions but, as a general rule, you should be able to approve a copy of any advertising or directory entries before you pay anything.
  • Do you need a venue? If so, is it easy to access? Do you need a spot where you will get ‘passing trade’ (people walking past the door)? If passing trade is important then location is critical. It is usually a plus if there are other similar businesses close by as people will come looking in that area for what you offer. You also need to assess how ready the space is for starting business. Does it have all the necessary amenities? (e.g. Toilets for you and staff, sink with drinking water, facility for making tea/coffee, security locks, Fire Exit signs, power supplies for equipment). Check the insurance cost and what the rates will be. If customers will be visiting, your venue needs to feel welcoming – clean, light, comfortable, smart and business-like. Don’t overdo the smells. A clean smell is good but strong bleach is off-putting. Incense and other fragrances can trigger allergies in some people, which might stop them at your door.

Once you’ve started…

  • Keep your personal money and the business accounts totally separate. You may have to lend money to the business to get it going. Make sure it is properly recorded in the accounts as a loan. It is a debt that the business owes you and can pay back without you having to pay extra taxes on it. But this will only be if you have properly recorded it and kept everything separate. There is no such thing as ‘just taking that back out of the cash box’. If you have a limited liability company, the law requires you to regard the business as a totally separate thing – like another person. Anything that passes from it to you will be wages, ‘director’s emoluments’, loans or ‘drawings’. If in doubt, don’t touch and consult your accountant.
  • Update your accounts regularly. Once a day is excellent, once a week is good, once a month is rarely enough.   The further in the past things are, the harder they are to remember or track down. Doing the bookkeeping frequently will make it easy. It also means you are very much in touch with how your business is doing and can address problems before they become too big.
  • Keep an eye on whether you are making money or losing it. From month to month the figures will vary but you must know if your plan is working out in reality and identify any issues that can be corrected. If the numbers show that more is going out than is coming in, you will need to increase the income and/or decrease the outgoings to stay in business. A monthly review is usually sufficient to know what’s happening and soon enough to apply remedial measures. This is another important reason for keeping the accounts up-to-date. Badly maintained records increase the chances of an expensive mistake.
  • Step back and take an overview that is as objective as you can make it. A monthly review of how close you are to your objective should keep you on track, e.g. ‘How close am I to being a world leading producer of music recordings? It means that you have worked out how to measure the activities in your objective and are keeping tabs on it. If your objective has ‘quality’ in it somewhere, do you have someone else measuring the quality? Are you getting reviews on it on your website? Are they good or bad? Are you 5-star or ‘no comment’? If you want to be world leading, which magazine should be talking about you?   This review should tell you if you are out of focus or if you should really be producing boots instead of shoes because you do that better and like it better.
  • Keep a notebook. Write down everything that happens – receipts, payments, and agreements with people, phone queries that you make, decisions you make. You will have what you need when you have to check up on ‘what did I say?’, ‘the tax people told me something about this’, or ‘I didn’t agree to that, did I?’ Also, it is a reference point when you are doing the weekly accounts and need to clarify something. Don’t duplicate effort and let the receipt book be the receipts record, but have everything recorded somewhere. Using your memory is unreliable and clutters it up when you need to be focussed on the job.
  • It’s sad, but you can’t expect business colleagues or contacts to be your friend. They are in it for the business and will be very nice to you but don’t try borrowing money from them or expect them to hang around waiting for money you should have paid them. The basic rule is to keep your personal life quite separate from business. It’s what everyone else is doing, so you need to understand it and fit into the flow. If you get a ‘nasty’ letter, don’t let it upset you, just see it as someone ‘doing business’. Getting advice before you respond could also prevent you making a mistake based on an emotional reaction.
  • Similarly, you shouldn’t accept poor service or low quality just because you want to ‘be nice’.   It’s not doing anyone a favour to let them sell you something that’s not fair value. Some people will try to sell you nothing for something and it’s to their benefit as well as yours to just not play that game. You can be nice as you do it, but people will respect you more for being firm about what you want.
  • Market, market, market. If people don’t know you are there, how will you get business? There are a lot of companies that will help you with marketing (for a price) but there are many things you can do for yourself. Prepare a professional-looking website and a brochure that can be handed out or posted. A website won’t be enough by itself – what prompts people to look at it? Where would you expect to see your sort of service and what are other people doing? Get some professional photographs of what you sell and put them on the website and into your brochure. Where will you advertise? The local Chamber of Commerce may have advice or there are a number of government or local council initiatives that could assist.   Look at other opportunities e.g. fairs, a display case, magazine advertising, local papers, brochures in the local hairdressers, or a notice up in the library.
  • Look smart. A tunic or apron is appropriate for some jobs but in any event you need to look well cared-for and as though you are successful at what you do.   Clothes must look clean and tidy. Holes in jeans may be the ultimate fashion at the time, but not many customers would be impressed by it. Make sure your hands and nails are clean, keep a nailbrush on the hand basin and use it. If you work with your hands and keeping them clean is impossible on the job, wash them thoroughly before you are in front of customers.
  • Celebrate your successes and see mistakes as challenges and opportunities to know how to get it right next time, when it might be more important. There will be times when it looks too hard, but it gets easier if you can look back to your high points.
  • Pay all the right taxes. Don’t pay any more than you should, but don’t try to cheat. Cheating is not smart because (a) you’ll get caught and it will be far more expensive than paying the right amount in the first place would have been, and (b) it takes you off-focus for succeeding at what you do best and want to do in your business.   If you’re paying taxes, you must be earning money. The UK government Revenue and Customs website has a lot of very helpful information about what you can claim as expenses when you are self-employed and they provide free training courses.

And – tough luck – don’t expect to get rich quickly. It’s more about doing something you love doing and being your own boss while you do it. You might get rich if you do whatever it is very well. The more you believe in it, and the more you work towards doing well, the more likely you are to succeed.


That Little Brown Envelope from Canada Revenue Agency (CRA) Arrives

By Randall Orser | Personal Income Tax

Paying Tax TNThere comes a time in every businesses life when they get that little brown envelope from Canada Revenue Agency (CRA). It can be quite innocuous, or it could be a major issue coming. You’ll never know until you open it, and you shouldn’t ever not open it. We’ll discuss what that envelope could contain, and how to deal with it.

CRA has switched to a recycled, brown paper envelope quite come time ago, and most correspondence comes in these envelopes. The envelope could contain your notice of assessment for taxes, GST/HST, your current payroll remittance form, and it could also contain a letter about an upcoming audit or review. We’ll talk about this last one.

Canada’s tax system is based on self-assessment. As such, each year, the CRA conducts a number of review activities, or audits, that promote awareness of and compliance with the laws it administers. These reviews are an important part of the compliance activities we undertake in order to maintain the Canadian public’s confidence in as well as the integrity of the Canadian tax system.

There are a number of reasons why an income tax return may be selected in one of our review programs. These reasons include:

  • random selection;
  • comparison of information on returns to information received from third-party sources, such as T4 information slips;
  • types of deductions or credits claimed and an individual’s review history.

CRA’s review programs include the:

  • Pre-assessment Review Program;
  • Processing Review Program;
  • Matching Program;
  • Special Assessments Program.

Under these programs, we review various income amounts, federal and provincial/territorial deductions, and credits on individual income tax returns to ensure that amounts are reported correctly and that they are properly supported.

If your tax return has been selected for review by one of the above programs, CRA will first try to verify your claim based on the information you filed. If more information is needed, a representative from a tax centre will contact you or your authorized representative by telephone or in writing.

When responding to CRA’s request for more information, be sure to:

  • include the reference number found at the upper right corner of the letter;
  • send your reply and all requested documents to the address in the letter within the time frame indicated;
  • provide all receipts and/or other documents requested.

If your return has been selected for review by CRA’s Processing Review (PR) program, you or your authorized representative may send scanned documents to them electronically using My Account or Represent a Client. If receipts or documents needed to support your claim are not available, include a written explanation or call the number at the bottom of the letter to explain your situation.

If your claim has been adjusted after being reviewed by one of CRA’s programs and you have additional information or documents related to the claim, CRA will accept all new submissions and review your claim again for a possible adjustment. Send any additional information or documents to the address indicated in the letter or electronically.

When you get one of these brown envelopes, remain calm, open the letter and read the contents. If you used a tax preparer, let them know you have this letter, and send it to them. The next thing is to discuss what the letter wants, and gather all the information requested. The main thing is to be calm, and follow the instructions in the letter. And, don’t give CRA any more than they are requesting.

Before You Even Start Your Business You Need to Ask These 4 Questions

By Randall Orser | Small Business

business strategy on a wall and running businessman TNIn light of the past economic recession, when companies all over the country are downsizing and finding a good job is next to impossible, millions of people have taken to starting their own businesses and are hoping to earn a considerable income through their own efforts. While many individuals have succeeded as small business owners, some were met with failure simply because of inadequate planning. The truth is that starting a new business takes a lot of time and effort; you need to consider certain factors before launching a business. If you’re toying with a business idea you think is going to be a hit, ask yourself a few questions before you take the plunge into the business world.

Do you have time to run your business?

So many people mistakenly assume that just because they will be running their business from home, it means they will have a lot of free time on their hands. On the contrary, quite the opposite is true. Most home-based business owners need to work a lot more and a lot harder to match the income they used to make when they were working in a traditional office. This is particularly true during the first few months of running the business. Once your business has taken off, however, you may be able to relax a bit and work less hours. Before this happens, you will probably have to work extra long hours, so that’s an important factor you have to consider.

Are you qualified?

Quite often, people think they have a brilliant business idea and find out too late they aren’t qualified to offer that particular service. Let’s assume you’re a mom of four and you’ve just started a business that involves child care. Being a mother of four, you’re quite confident in your capabilities in this field. Your potential clients, however, are likely going to look for an individual who is not only experienced but certified in child care as well. In this case, you will have to get the certification or come up with another business idea where your skills will be put to better use.

Do you have room for your business?

Many home businesses start out small. Once your business takes off, however, you may find yourself in need of bigger space for your supplies or your products. Unless you have extra space in your home (e.g., a spare room or garage), you may soon have to expand outside by renting storage space, which is obviously an additional expense. If you don’t want to deal with such problems, think ahead when you are still in the business planning stage

Are you financially capable of running the business?

Money is one of the most significant factors you have to consider before starting a business. Many people underestimate the costs required to set up a business. Even if they take out a loan, sometimes it isn’t enough to cover all the initial expenses. To avoid these hassles and to increase your chances of business success, plan your finances thoroughly.

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