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Why You Need More Than a Brilliant Idea to Succeed as an Entrepreneur

By Randall Orser | Small Business

Entrepreneurs are more than clever business people who see a need for a new product or service and fulfil it. Successful entrepreneurs not only have brilliant ideas, but also can build relationships, understand customers’ wants, and interpret the constant signals from the market. If you want to succeed as an entrepreneur, you will need vision and the skills to see your plans come to fruition; otherwise, you are just are a dreamer.

Entrepreneurs Need Emotional Intelligence

Emotional intelligence is about having an awareness of your own emotional state of being and not allowing emotions to overrule your decision-making facilities. At the same time, a high level of emotional intelligence enables entrepreneurs to read other people very well and to know when and how to build instantaneous rapport with potential customers or business partners. Some entrepreneurs may use emotional intelligence to manipulate other people or may get another person to tell more than the individual originally intended to say.

Entrepreneurs Need to Build Relationships

Entrepreneurs are extremely good at building relationships, and will often build long term business partnerships with several different businesses. Entrepreneurs excel at marketing, but are not necessarily good salespeople.

A sales person will push to close the deal and to get the sale, while a good entrepreneur will focus on the relationship and may stop short of closing the deal to maintain the good relationship. Often entrepreneurs need to work in conjunction with a sales person who can close the deal, after the entrepreneur has set up the foundations by building a strong relationship with the potential customer or affiliate business.

Entrepreneurs Need to Have a Vision

Small business coaches will often tell individuals who are starting a small business to plan everything and to set up a five year plan. However, entrepreneurs work towards a vision and may not plan every single step along the way. Entrepreneurs will often work with a big picture idea and plan the details to fit in with the overall vision, rather than focus on the details of a plan and forget where the plan leads the business.

Entrepreneurs Need Flexibility to Change the Plan

Entrepreneurs will feel free to change the details of the plan to take advantage of new opportunities. The difference between a small business owner and the entrepreneur is often most visible when a new opportunity knocks. The entrepreneur will be willing to change the plan and to take risks if the opportunity that presents fits into the overall vision, whereas the small business owner will be more likely to ignore the opportunity if it was not in the original business plan.

Entrepreneurs Need Good Timing

An understanding of the cyclical and rhythmic nature of business allows entrepreneurs to know instinctively when the time is right to launch a new business venture, or a new product. Entrepreneurs possess good timing and will know when to hold back on a launch of a new venture until the market reaches the right step in the cycle to ensure the new venture is a success.

Entrepreneurs Need Industry Knowledge

Although entrepreneurs rarely react to what competitors are doing, entrepreneurs do study the competitors and the industry. This industry knowledge enables the well-informed entrepreneur to lead the industry rather than react to it, and to have that impeccable timing to know when to launch the new products.

A brilliant idea will only get you so far in the business world. However, blend the clever business idea with a high emotional intelligence, relationship building skills, vision, flexibility, good timing, and strong industry knowledge, and an entrepreneur has the world at his or her feet.

New Rules for Principal Residence

By Randall Orser | Personal Income Tax

In late 2016, the Liberal government decided to make changes to Canada Revenue Agency’s (CRA) reporting requirements for the sale of your principal residence. Supposedly this will improve compliance and administration of the tax system. Is this the beginning of a new way to tax you, the taxpayer? Well, probably will be though not now. Never underestimate a government to tax its citizens.

When you sell your principal residence or when you are considered to have sold it, usually you do not have to report the sale on your income tax and benefit return and you do not have to pay tax on any gain from the sale. This is the case if you are eligible for the full income tax exemption (principal residence exemption) because the property was your principal residence for every year you owned it.

Starting with the 2016 tax year, due by April 30th, 2017, you will be required to report basic information (date of acquisition, proceeds of disposition and description of the property) on your income tax and benefit return when you sell your principal residence to claim the full principal residence exemption. If you sell your principal residence will have to report the sale on Schedule 3, Capital Gains of the T1 Income Tax and Benefit Return. Reporting will be required for sales that occur on or after January 1, 2016.

The principal residence exemption is an income tax benefit that generally provides you an exemption from tax on the capital gain realized when you sell the property that is your principal residence. Generally, the exemption applies for each year the property is designated as your principal residence.

For the sale of a principal residence in 2016 or later tax years, CRA will only allow the principal residence exemption if you report the sale and designation of principal residence in your income tax return. If you forget to make a designation of principal residence in the year of the sale, it is very important to ask the CRA to amend your income tax and benefit return for that year. Under proposed changes, the CRA will be able to accept a late designation in certain circumstances, but a penalty may apply.

The penalty is the lesser of the following amounts:

  1. $8,000; or
  2. $100 for each complete month from the original due date to the date your request was made in a form satisfactory to the CRA.

More information on late designations is available on the CRA website under Late, amended, or revoked elections.

The CRA will focus efforts on communicating to taxpayers and the tax community the requirement to report the sale and designation of a principal residence in the income tax return. For dispositions occurring during this communication period, including those that occur in the 2016 taxation year (generally for which the designation would be required to be made in tax filings due by late April 2017) the penalty for late-filing a principal residence designation will only be assessed in the most excessive cases.

Your Home is used for a Business or Rental

If only a part of your home is used as your principal residence and you used the other part to earn or produce income, whether your entire home qualifies as a principal residence will depend on the circumstances.

It remains the CRA’s practice to consider that the entire property retains its nature as a principal residence, where all the following conditions are met:

  • the income-producing use is secondary to the main use of the property as a residence;
  • there is no structural change to the property; and
  • no capital cost allowance (CCA) is claimed on the property.

If your situation does not meet all three of the conditions above, you may have to split the selling price and the adjusted cost base between the part you used for your principal residence and the part you used for other purposes (for example, rental or business). You can do this by using square metres or the number of rooms, if the split is reasonable. Instructions are provided in the guide T4037, Capital Gains 2016, on how to report the sale of your principal residence in this situation.

If you’ve sold your home, and it’s your principal residence, in 2016, then remember to have the information necessary to report said sale on your income tax return. Now, no gain will be attributed to said sale, however, that may change in the future.

If I Have Foreign Income, What Exchange Rate Do I use?

By Randall Orser | Personal Income Tax

Nowadays many people have income from outside Canada, and when it comes to filing their income taxes must include said income. Many businesses are selling outside of Canada, too, and may receive funds in the country from which they sell. The question then becomes, ‘what exchange rate do you use?’

What is the exchange rate? The exchange rate is the price of one national currency, such as the Canadian dollar, expressed in terms of another currency, for example, the U.S. dollar, or a basket of currencies.

Canada Revenue Agency (CRA) used to recommend what exchange rate to use when filing your personal taxes, and, usually, did an average exchange rate for the year. You weren’t required to use this rate; however, it did make it easier to file your taxes. This save you of having to go to the bother of looking up exchange rates for the date you earned the income; if you even remember the date you received the income.

Now, CRA just recommends you use the Bank of Canada exchange rates. At the BOC website, you can get exchange rates for up to 26 currencies, based on a single rate reflecting the daily average exchange rate per currency pair, which will be published each day. If your foreign income is form outside these 26 countries, you will have to either find an exchange rate elsewhere, or check what the rate was on the day you received the income. There was the average exchange rate for the year, however, I can’t see on the site where this will continue nor does it say it will be discontinued, so we’ll just have to wait and see.

Using the Exchange Rate on Your Personal Taxes

When you go to file your personal taxes, look at what foreign income you have and go to the BOC website. Do you remember when you received that income? If yes, use the exchange rate, or find the amount that was deposited into your bank account, and use that rate. If it’s from multiple deposits, such as the British Pension, then you’ll have to calculate the exchange rate each time, or add up the amounts from each month.

If you just received a slip, and have no idea when the money was deposited or what it’s for, then use the average yearly rate, if it’s still available, or the rate at December 31st for that tax year.

Using the Exchange Rate for Business

For business, it’s a bit easier on when to use the exchange rate.

For sales, when you create the invoice for the customer pick the rate for that day, if available, or the previous day. Fortunately, accounting software now can link to the Bank of Canada website and pick the rate, normally it’s for the previous day and that’s okay. You could also just pick an average rate and go with that for a time, until it changes. For example, say the US dollar, you can pick an exchange rate of 1.35 and go with that until you feel it’s changed too much to keep using it.

For customer payments, use the exchange rate the bank gives you when you deposit, if into your Canadian dollar account. Otherwise, use the rate on the day of the deposit, or the previous day. Are you receiving a lot of foreign currency? You may want to setup a bank account in that currency.

For purchases, you can follow the same advice as for sales. One client I have uses an average, and then adjusts that rate up or down depending on how the Canadian dollar is doing compared to the currencies he makes purchases in. However, when he sends the supplier money, he uses the rate from the currency exchange house.

That’s something else to think about for business, if you do a lot of purchasing in foreign currencies, I suggest using a currency exchange house. They usually give better rates than the banks, and can send bank drafts and wires at much cheaper rates than the banks (many banks are charging $40+ for a wire transfer).

Also, think about purchasing forwards when you have a large volume of transactions in a currency. A forward is a contract to buy so much of a foreign currency at a fixed exchange rate. You’re basically hedging your bets about the currency going up. So, you lock in the exchange rate for a certain period, then much purchase the forward at the rate agreed upon at its creation.

For example, you agree to buy a forward on the US dollar at an exchange rate of 1.35 and it expires in three months. At the expiration, you purchase the agreed amount of dollars at the 1.35 rate, or pay a penalty for not doing so. If the exchange rate goes up to 1.40 then you’ve saved 5 points and depending on the amount quite a bit of money. However, if the rate goes down to 1.30 then you’ve paid 5 points more than you needed to. This is the risk you take doing forwards.

Having foreign income can be a great, especially when the Canadian dollar is low compared to that foreign currency. However, when it comes time to reporting that income on your tax return, or in your business, ensure you are using the correct rate.

Understanding Your Financial Statements

By Randall Orser | Small Business

So, you’re going to your accountant’s office tomorrow to review your company’s year-end financial statements. They have already sent to you a draft copy of the statements so that you may prepare for tomorrow’s meeting. But without going over the details in person with your accountant, you’re not sure what it all means.

A well-prepared set of financial statements, which should include comparative figures for the prior year, provides information about the company’s performance and financial position. Fundamental to understanding your financial statements is an analysis of its components by calculating certain financial ratios and comparing them to industry-wide ratios or those which are relevant to your business. These ratios will reveal important information about your company’s past, which will help you choose the path you want it to follow for the future.

Although a complete set of financial statements includes a statement of income, a balance sheet, a statement of retained earnings and a statement of changes in financial position, this article will be devoted to explaining ratios that are useful in understanding the statement of income and the balance sheet.

The Statement of Income

This is where you’ll find your company’s “bottom line”. With some simple analysis, however, there is a lot more information available.

By comparing sales from year to year, you’ll see if sales have increased more than any price increases that you implemented during the year. If they have, great! If not, it means you’re either losing customers or your customers are buying less from you. If your sales are analyzed by major categories, you may also be able to identify meaningful changes in your sales mix.

You can figure out your inventory turnover ratio by dividing the cost of sales by the average inventory for the year. The higher the ratio, the better off you are. A drop in your turnover ratio, however, may reveal an overstock situation that has yet to be corrected.

The gross profit (or gross margin) represents the excess of sales over cost of sales. A change in your gross profit ratio, which means dividing gross profit by sales, may be a symptom of many different conditions. It may mean that your sales force has maintained margins, or that you had to give in to competitive forces. On the other hand, a change may also mean that your suppliers have increased or cut their prices. If you’re a manufacturer, it may also mean using various production elements efficiently. If your sales and cost of sales figures are analyzed by major categories, you may be able to spot a trend for a type of product, rather than for the company.

For operating expenses, your primary concern should be cost control. You should focus on significant variances in the amount of expenses for any one line item, or on any changes in relationships between line items. For example, if there is a strong relationship between commission expense and sales, check to see if the commission rate on the financial statements is in line with your expectations. Furthermore, fixed expenses such as rent, insurance, and other overhead expenses, should generally be the same amount from year to year. Big variances in fixed expenses may require further investigation.

The Balance Sheet

The balance sheet gives you a financial “snapshot” at the year-end date. As you know, the balance sheet reports the company’s assets (the things that it owns), its liabilities (the things that it owes) and its shareholders equity (net worth). Using some basic balance sheet ratios will help you identify trends about your company’s finances and ability to meet its commitments.

The current ratio, being current assets divided by current liabilities, is one indicator of a company’s liquidity. The higher the ratio, the better; but a drop in the ratio may indicate trouble, such as using a demand line of credit to finance new capital equipment or other long-term assets. Another reason for a deterioration in the current ratio would be recent decreases in operating cash flow to pay your trade suppliers and other current debts as promptly as in the past. The quick assets ratio, which represents the ratio of current assets less inventory over current liabilities, is another good indicator of liquidity.

To analyze accounts receivable, you should use the accounts receivable turnover ratio, being the amount of credit sales divided by the average accounts receivable balance. When this ratio drops, it means that it’s taking longer to collect your receivables, which might be a problem that’s widespread throughout your customer base, or may be concentrated with just a few of your major customers. Although both situations require corrective action, the latter is especially dangerous. You may get hit with a big loss because of an unhappy customer or because of their own financial difficulties.

On the liability side, the most commonly used ratio is the debt-to-equity ratio, which is the sum of the liabilities divided by tangible net worth (shareholders’ equity less the book value of intangible assets). The more debt that you take on, the higher this ratio will become. Taking on too much debt means less flexibility in making business decisions or taking on new projects. This is because your lenders will have become your business partners, and that’s not the reason you went into business in the first place, is it?

To determine return on investment, which shows a shareholder’s yield on his / her investment, simply divide net income (or loss) by tangible net worth. An unusually low ratio may mean that the company’s profitability isn’t what it should be when compared to prior years or to industry standards. Alternatively, if cash balances are high, the current ratio is higher than normal and the debt to equity ratio is lower than normal, a low return on investment ratio may mean that it’s time to make either make a substantial distribution of excess company cash to shareholders or make an investment in another venture that will improve the company’s overall profitability.


Now that you’ve analyzed the statements, you will have come to certain conclusions about how well your business has fared over the past year. But was this year’s performance in line with your real expectations? Had you even set targets and goals for the year?

Planning for success, by preparing financial and operational budgets, is an important part of effectively managing your business. You should also make sure that your financial reporting system is set up in such a way that reporting actual to budgeted results is a snap. If you need help in preparing budgets or in setting up a financial reporting system, seek your accountant’s advice. He / she will be qualified to advise you on what methods and systems are best suited to you and your business.

What is a Pooled Registered Pension Plan?

By Randall Orser | Investments

A few years back the Canadian government was realizing that people weren’t saving for retirement, and that the Canada Pension Plan (CPP) would have to go through drastic rate increases that would devastate the economy. So, the Pooled Registered Pension Plan (PRPP) was created.

A PRPP is a retirement savings option for individuals, including self-employed individuals. A PRPP enables its members to benefit from lower administration costs that result from participating in a large, pooled pension plan. It's also portable, so it moves with its members from job to job. Since the investment options within a PRPP are like those for other registered pension plans, its members can benefit from greater flexibility in managing their savings and meeting their retirement objectives.

Contributing to a PRPP

Like RRSPs, the maximum amount that a member or employer can both contribute to a PRPP in each tax year without tax implications is determined by the member's RRSP deduction limit.

Any employer PRPP contributions, combined with a member's contributions to their PRPP, RRSP, SPP, and spouse or common-law partner's RRSP and SPP, that are above the RRSP deduction limit may be considered excess contributions. It is important for members to know how much unused contribution room they have available in each tax year.

Any contributions made to a PRPP that are not deducted on the member's income tax and benefit return in each year are referred to as unused RRSP contributions. If a member withdraws the unused contributions from his or her PRPP, an offsetting deduction may be claimed. For more information, see What to do with unused registered savings plan contribution and "Withdrawing unused contributions" in Guide T4040, RRSPs and other Registered Plans for Retirement.

A member can make voluntary contributions to their PRPP between January 1 in each year and 60 days into the following year, up until the end of the year in which they turn 71. Member contributions are deductible on their income tax and benefit return, but the deduction must not exceed the difference between their RRSP deduction limit and the employer's contributions to their PRPP.

Death of a PRPP member

Like other registered retirement plans, when a PRPP member dies, all property held in the PRPP account is deemed to have been distributed immediately before the date of death. The fair market value (FMV) of the assets held in the account less any amounts paid to a qualifying survivor is included in the deceased member's income on the final income tax and benefit return.

In the case of the death of a member who had a spouse or common-law partner, if the deceased member's spouse or common-law partner was named in the agreement with the financial institution, the surviving spouse or common-law partner become a surviving member of the plan, taking over ownership and future direction of the PRPP account for the deceased. The surviving member is then entitled to receive a lump-sum payment from the PRPP or can choose to transfer the funds directly, on a tax-deferred basis, into another investment plan such as another PRPP, RRSP, SPP, RRIF or RPP.

Financially-dependent child or grandchild

In the case of a PRPP member who has a financially-dependent child or grandchild, the child or grandchild, if designated, will as a qualifying survivor, receive the funds from the deceased's member's PRPP account up to any amount designated. Since payments made from the PRPP are taxable, the child or grandchild would include the amount received as income on his or her income tax and benefit return. Same as for RRSPs, the amount received can be used to purchase a qualifying annuity.

If the financially-dependent child or grandchild has a physical or mental infirmity and is eligible for the disability tax credit (see line 316 – disability amount), the lump-sum amount from the deceased's PRPP can be directly transferred or "rolled over" on a tax-free basis, into a registered disability savings plan for an eligible individual.

Breakdown of the marriage or common-law partnership

A spouse or common-law partner or former spouse or common-law partner of a PRPP member, who is entitled to the funds from the member's PRPP account because of a breakdown of the marriage or common-law partnership, may transfer the lump-sum amount to: another registered plan such as another PRPP, RRSP, SPP, RRIF or RPP of the individual; or purchase a qualifying annuity.

Investment options

The investment options available for PRPPs are like those available for other registered plans, but there are some restrictions. The Income Tax Act does limit the type of investments that can be held in a PRPP to prevent tax avoidance planning. For example, a member cannot hold restricted investments in a PRPP such as their mortgage or debts, and shares of companies in which members have a significant interest.

The Pooled Registered Pension Plan (PRPP) is another great way for you to save for retirement, and, perhaps, save on the fees associated with other plans. What are you doing for retirement? If RRSPs, don’t make sense then look into the Pooled Registered Pension Plan (PRPP).

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Is Your Company Becoming Too Lean & Losing Out Because of it?

By Randall Orser | Small Business

It seems every business is touting the importance of being lean and mean. Lean manufacturing, lean supply chains and reduced overhead seems to be the recipe for today’s businesses, or at the very least, today’s version of how to succeed in business. It certainly makes sense given the severity of this most recent recession. However, was this move born out of necessity? Was it done to reduce excess, to become more competitive, or was it done simply because some companies wanted to emulate the strategies of other enterprises? Ultimately, was it done because it had to be, or were some companies pursuing this action simply because they read it was the right thing to do? Surprisingly, in a few situations, it was the latter.

There are many benefits to being lean. First, there’s the benefit afforded to companies who reduce their fixed expenditures. This reduces the company’s overhead and allows companies to offer more competitive prices. Second, pursuing vendor consolidation allows companies to streamline their supply chain and reduce inventory costs. However, there are also several drawbacks to pursuing lean principles. Some of these include reduced market presence, a reduction in the company’s service capabilities and the inevitable pursuit of a supply chain strategy that doesn’t meet the needs of the company’s customers or its market. The question you must ask yourself is whether your decision to become lean has limited your company’s ability to capitalize on opportunities. Was this decision made in your company’s best interests, or where you simply pursuing a course of action to keep up with competitors?

Understanding the consequences of lean principles

Lean principles are enticing. They are the ultimate solution to complex business problems. They represent the ideal scenario of reduced expenditures, reduced inventory costs and higher profit. However, are lean principles solid in theory and lacking in practicality? Do they offer the perfect solution to an imperfect business world? Ultimately, do they promise more than can be delivered? While lean principles do work for some companies, for others they are solid in theory, but lacking in their ability to deliver the goods. Becoming lean can lead to companies missing out on opportunities. So how does this happen?

Reduced market presence

One of the first areas companies cut in a recession is their marketing expenditures. Unfortunately, a few companies forget that marketing and sales are one and the same. Cutting back on marketing expenditures often seems like an easy decision. However, why would a company cut back on the one essential function that drives business? Why reduce the effectiveness of marketing and its ability to deliver sales opportunities? Surprisingly, some companies cut marketing expenditures simply because they lack the ability to track its effectiveness.

Several companies fail to see how marketing lowers their costs of finding new customers, how it increases gross profit, how it increases market share and stabilizes the company’s future and ultimately, how it addresses customer needs by answering their most pressing questions. When thinking of marketing, think of how much your customers need you in times such as this. Think of how they need your company’s support, knowledge, help and input during difficult times. Those companies who remain a strong player within their market are the ones who will benefit most.

Reduced service levels

One of the biggest impacts of becoming too lean is the eventual decline in the company’s service capabilities. Companies must clearly define those services that are deemed essential to sustaining business and retaining customers. After all, when times are tough, companies must do everything they can to retain market share. Therefore, it’s essential to clearly define the company’s essential services and to be mindful of the impact of cost reductions on the company’s ability to service its clients. What should companies look for?

A company’s service capabilities are defined by its internal and external clients. Internally, the company must have clearly defined procedures, work processes and seamless operations to improve how work is done and how fast it is completed. Who benefits the most from improved operations? The customer does. Therefore, understand that a company’s service levels include far more than just its customer service department. It includes how products are packaged, delivered, how customers are dealt with by accounting, technical support, as well as how sales & customer service can provide solutions. Becoming too lean will produce savings, but those benefits are easily eroded when customers are lost!

Reduced supply chain effectiveness

Companies need inventory to capture market share, but they loath the financing costs of supporting that inventory. Financing inventory is an extremely expensive part of running a successful business. Companies are right to identify inventory and their supply chain to reduce costs, but the mistake they make is by pursuing an inventory management and supply chain strategy that is not conducive to their business model, their market and their customers’ needs.

Instead of reducing costs by identifying their cost drivers, they instead change their inventory management philosophy by pursuing lean strategies they can’t possibly make work. This often happens when businesses decide to pursue lean supply chain practices like JIT, or Dell’s “Push-Pull”, when they lack the purchasing power, economies of scale and operational abilities to make either of these approaches work. Reduce your company’s inventory costs. However, start by identifying those costs and putting a plan in motion to reduce expenditures. Inventory may be costly, but you need it to capture opportunistic sales and maintain your market share.

Companies must be able to reduce expenditures and continually pursue initiatives that lower costs. However, they must also be mindful of the consequences of becoming too lean. There are benefits to improving operations, reducing inventory costs and streamlining supply chains. However, these benefits must be tempered with the consequences of losing market share and customers. Be sure that the changes your company makes are ones that are needed to improve your bottom line. Do what’s right for your business and not what you think you should do because other companies are pursuing the newest and latest trends.

Is This Email from CRA a Scam?

By Randall Orser | Business Income Taxes

Since it’s now tax time, the scammers start to ramp up their efforts, and no doubt you’ll get an email claiming to be from Canada Revenue Agency (CRA). Every year the scammers are out, and every year, they get better at what they do.

As a taxpayer, you should be vigilant when you receive a fraudulent communication that claims to be from the Canada Revenue Agency (CRA) requesting personal information such as a social insurance number, credit card number, bank account number, or passport number.

These scams may insist that this personal information is needed so that you can receive a refund or a benefit payment. Cases of fraudulent communication could also involve threatening or coercive language to scare individuals into paying fictitious debt to the CRA. Other communications urge you to visit a fake CRA website where the taxpayer is then asked to verify their identity by entering personal information. These are scams, and taxpayers should never respond to these fraudulent communications or click on any of the links provided.

If you receive an email saying you owe money to the CRA, you can call them or check My Account to be sure. If you have signed up for online mail (available through My Account, My Business Account, and Represent a Client), the CRA will do the following:

  • send a registration confirmation email to the address you provided for online mail service for an individual or a business; and
  • send an email to the address you provided to notify you when new online mail is available to view in the CRA's secure online services portal.

The CRA will not do the following:

  • send email with a link and ask you to divulge personal or financial information;
  • ask for personal information of any kind by email or text message.
  • request payments by prepaid credit cards.
  • give taxpayer information to another person, unless formal authorization is provided by the taxpayer.
  • leave personal information on an answering machine.

Exception: If you call the CRA to request a form or a link for specific information, a CRA agent will forward the information you are requesting to your email during the telephone call. This is the only circumstance in which the CRA will send an email containing links.

Fraud Scenario – E-mail phishing

At 80 years old, Irene is excited to use her new computer to keep in touch with her family. One afternoon, she receives a message that seems to be from the CRA claiming that she is entitled to a significant tax refund. The email includes a link to a website asking for personal information, including address, date of birth, and banking information, so that the money can be direct-deposited into her bank account.

Irene doesn’t remember giving the CRA her new email address and is surprised that the CRA is contacting her. What’s more, she has never qualified for similar tax refunds in the past. However, Irene is still getting used to her computer, and assumes that since the email is addressed from the CRA it must be real. She follows the link and fills out her personal information.

Does this scenario sound familiar? Every year, Canadians lose millions of dollars to email phishing scams that result in identity and financial theft. Beware of emails claiming to be from the CRA. The CRA never requests personal information of any kind from a taxpayer by e-mail. Delete phishing emails and do not click on any links; they can carry harmful viruses that can infect your computer.

When in doubt, ask yourself:

  • Am I expecting additional money from the CRA?
  • Does this sound too good to be true?
  • How did the requester get my email address?

Remember if it sounds too good to be true, it probably is.

You can download this PDF from CRA

Don’t Get Scammed!

What Every Small Business Owner Should Know Before—and After—Hiring a Bookkeeper

By Randall Orser | Small Business

Many small businesses need to hire a skilled bookkeeper to track income and expenses, not only for tax preparation purposes, but for financial management as well. But how do you find a qualified bookkeeper, what should you look for and what should you look out for? We’re taking more about someone you hire as an employee and not necessarily as a freelancer.

A common misconception made by accounting novices is that anyone that can add and subtract can be a bookkeeper. Another is that anyone with a little computer savvy can purchase and use popular accounting software to meet his bookkeeping needs. Useful bookkeeping requires some basic knowledge of accounting, including concepts such as assets, liabilities, equity, income and expense accounts, and can understand financial statements. Furthermore, if you have employees your bookkeeper should be familiar with payroll taxes and federal and state laws pertaining to employees, even if you have an outside service preparing the payroll. Frequently, you can find individuals offering their services as “bookkeepers” when they do not have a grasp of these basic accounting principles. Unfortunately, if the employer also does not understand accounting, it can be months or more before he finds out that this bookkeeper really doesn’t know what he is doing.

The best place to start when looking for an acceptable candidate would be your accountant’s office. Many accounting office’s offer bookkeeping services, but their staff bookkeeping services are often billed at a premium. If your accountant offers this service, but you feel that the rate is too high for your small business, ask the accountant if he can refer you to a qualified independent bookkeeper. Rates for these individuals usually run a little lower.

You should interview several bookkeepers until you find one that you feel comfortable with, as this is someone you will be working with closely on sensitive information relating to the business. You should also request permission to run a background check on your prospective hire, as incidents of fraud and embezzlement do occur. The individuals who have committed these types of crimes are not always prosecuted, and after being discovered and terminated, will often take employment elsewhere with unsuspecting business owners. An experienced and reputable bookkeeper will not be offended by this request, and should be able to offer business references as well.

There are bookkeeping tests that you can administer to your prospective hire to determine if the individual has sufficient skill to perform the tasks necessary. Many are offered free on the Internet, some provided by professional bookkeeping organizations.

Once you have hired a bookkeeper, there are some ways to protect your business from fraudulent activities and in turn allow the bookkeeper to feel free from suspicion.

The following is a partial list of good practices:

1. Have all bank information such as statements, passwords, cancelled checks, etc. mailed to your home or a different business address. Open all such mailings, before any employees, to review for any suspicious activity and ASK QUESTIONS if something doesn’t look right.

2. Never give out passwords on bank, credit card, or loan accounts to the bookkeeper even though it may seem more convenient to do so.

3. Make sure that all bank and credit card accounts are reconciled properly and promptly and that you review the reconciliation reports. If you don’t know how to read a bank reconciliation report, ask your banker or your accountant to teach you what to look for.

4. Make sure that you have adequate “separation of duties” policies in place. Some examples of this would be:

a. The employee recording a bill or creating a bill payment should not also be signing the checks.

b. The employee reconciling the cash should not be the same person taking the deposit to the bank.

5. You can find out more about the “Separation of Duties” by researching online or by speaking with your accountant.

6. Be sure that you and/or your accountant review the financial statements on a regular basis for anything that looks out of the ordinary.

Finally, when you find a good bookkeeper, be sure to value and compensate him accordingly. This is an important position within the business and should not be left to unskilled, poorly trained, and underpaid people.

What Your Tax Accountant Needs to Prepare Your Income Tax

By Randall Orser | Personal Income Tax

When it comes to income tax preparation, there are do-it-yourselfers and those who have their income tax prepared by professionals.

For many businesses, having a professional such as a tax accountant prepare their income tax returns is the most sensible option. We don’t all have time to become income tax experts and income tax mistakes can be costly. So why not hire an expert to get the job done right and cut down on tax time anxiety?

To do the job right, though, your tax accountant or other income tax preparer will need to have all the right tax records at hand – preferably organized. Use this checklist to get your records together for your tax accountant.

Business Records Your Accountant Needs

· Revenue and business expenses for the year

· Business use of auto

· Auto operating expenses

· Vehicle driving log with business kilometres driven

· Asset additions

· Business use-of-home details

Your tax accountant will also need any tax records such as:

· Last year’s Notice of Assessment

· Amounts paid by installments

· A copy of your income tax return filed last year (if you’re a new client)

Other records your tax accountant will need will depend on whether you’re asking him or her to prepare a T2 (corporate) or T1 (personal) income tax return.

If the latter, your tax accountant will need all the relevant information slips and tax-related documents. Here are some of the most common:

· T4 slips (if you have employment/business income)

· T4A commissions & self-employed

· T5013 Partnership Income

· T3 Income from Trusts

· T5 Investment Income

· RRSP contribution slips

· Charitable donations

· Medical and dental receipts

· Child care information

Save Money on Your Tax Accountant’s Fee

Accountants generally charge by the hour, so the harder you make their job, the more it will cost you.

Summarize and tally records wherever possible. Cheques, invoices, business expenses - all should be categorized and totaled. Sort all your information slips by type. Having your tax accountant do the organizing and tallying is the expensive way to go.

If you have several businesses, remember that you will have to have separate revenue and business expenses figures for each business, as business income should be listed by individual business on the T1 form.

Be as organized as you possibly can. For example, clip groups of receipts together by type and put a post-it-note stating what the category is on the top. The less your accountant needs to figure out, the less time she’ll be spending on your file.

And remember, having a tax professional prepare your income tax return(s) isn’t costing you as much as you think when you see the bill – it’s a legitimate business expense!

5 Ways an Accountant/bookkeeper Can Help a Small Business

By Randall Orser | Small Business

The decision to hire an accountant/bookkeeper is an important one for a business owner to make. Not only can hiring an accountant/bookkeeper free up some time for the owner, but also accountants/bookkeepers have specialized skills and knowledge that can be a significant asset for a small business. Here are five of the ways that the specific skills of an accountant/bookkeeper can help a small business to succeed.

Professional Reports

An accountant/bookkeeper will be able to prepare professional looking reports for the business. While this may not seem like a big deal, in many cases it is. When a small business owner contacts a bank or other financial institution to apply for credit, having a professional looking financial report can make the difference between getting approved or denied for the loan. Having standardized financial reports will also reduce the chances of governmental compliance issues, as the accountant/bookkeeper will be familiar with how the agencies want the forms to quickly access the needed information.

Tax Planning

Taxes are not just something that a small business owner should think about on a quarterly basis. As a business begins to grow and expand, certain steps can be taken to lessen the impact of federal and provincial taxes on the business. By lowering the amount of taxes that a small business should pay, the owner can use the savings to grow the business even more quickly. A properly trained accountant/bookkeeper that is familiar with the business can help the owner to find ways to save money on taxes now and in the future.


Though a business owner may be an expert in his or her industry, chances are he or she is not an expert on taxes and financial reporting. However, an accountant/bookkeeper is an expert on these issues. Just as business owner must keep up with changes in his or her industry, an accountant/bookkeeper spends time staying informed of changes that impact the field of accounting. By turning over the oversight of taxes and financial reports to an accountant/bookkeeper, a business owner will have more time to effectively manage the business into the future.

Simplifying Recordkeeping

Accountant/bookkeepers are just as concerned as business owners about accurate records. Accurate records make filing tax statements and other financial reporting documents easier while greatly reducing the chances of making a mistake. An accountant/bookkeeper can recommend record keeping procedures and even software that will reduce the amount of time it takes a business to maintain records and reduce the amount of time that it will take the accountant/bookkeeper to process these records.

Outside Perspective

An accountant/bookkeeper offers a business owner access to a perspective from outside of the business. This can be important in many ways. An accountant/bookkeeper may spot business trends that the owner is missing or uncover potential problems or overlooked opportunities. The accountant/bookkeepers outside perspective may be one of the biggest assets that the accountant/bookkeeper can provide a small business owner. This is due to an accountant/bookkeeper’s background of working with other companies and knowing what has and has not worked in the past. While this is generally not an official duty of an accountant/bookkeeper, some informal advice or suggestions from an accountant/bookkeeper can lead to large profits for a business owner.