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President/CEO Number Crunchers® Accounting Inc. Learn how to just say stuff it to this bookkeeping thing with our 'Just Say: "Stuff It" To Bookkeeping program.

How to Stay Motivated When Working from Home

By Randall Orser | Employees , Home Based Business , Small Business

Due to the coronavirus many more people are joining those already working from home.  It is quite a change from your normal routine of going into the office five days a week and working with others, so you need to make your new work environment as comfortable as possible for you to be productive.  When working for your company from home you should still to stick to your normal hours of work as much as possible and it is important to keep in touch with your colleagues by phone or video conferencing so that you do not feel isolated.  

For those who are their own boss and have been working from home for a while you don’t need to worry about being late for work, being written up, laid off or fired.  However, you are solely in charge, so it is up to you to face all the challenges involved in owning a business, most of all making money.  

If you are now finding yourself in one of these two situations how do you stay motivated while working from home?

1. Work-life vs Family Life

When working at home family can be your biggest distraction, particularly now as most of your family including kids may be at home.  It is vital to set up a separate room in your house to work where you can close the door if necessary.  You need to let the family know that when you are in that room you are working and unavailable except for an emergency.  Don’t forget that this separate workspace can allow for a tax deduction if you are self-employed.

2. Keeping your concentration when working from home

Difficulty concentrating one of the biggest problems reported by people who work from home.  You may have to deal with family noise, activities outside your window or even the view of your backyard especially if the sun is shining.  You may be disturbed by people who have a hard time accepting that you are working from home and think that you can run errands for them or that you have time to chat on the phone.  Some solutions to these problems might be to close the blinds, wear noise reducing headphones or ask the family not to do noisy activities while you are working.  You also need to make sure that friends and relatives know that you are not available between certain hours because you are

working.

3. Motivational Challenges

It is up to you to motivate and challenge yourself unless you are still employed by a company and working from home.  In that instance you still have to answer emails and phone calls from colleagues for information and updates.  This will help to keep your mind on the job.  If you own your own business, it can be way more difficult to keep motivated and let your attention slip to more appealing things.  You need to keep your end goal in mind which is to grow your business and make money


4. Dealing with the lack of Office Equipment

If you are working from home, either temporarily or permanently it is important for you to have the necessary equipment to do your job.  When you are working for an employer at home, they should provide the equipment that you need to do the job.  If own your own business, you should invest in the office equipment that you need.  These days computers, and multifunction printers and scanners are way less expensive than they used to be.  Look out for low interest and interest free deals offered by stores to help reduce the costs and you may be able to offset some of these expenses on your taxes.

5. Getting Access to Company Documents

If you are working from home for your employer, they need to set up a way for you to able to access company documents from home over the internet.  There are many programs and apps that will allow you to do that easily.

6. Egonomic Issues

It can be difficult to keep your concentration if you are not comfortable in your workspace.  Make sure you are equipped with a proper office desk and office chair to support your back, neck and shoulders. Take a few minutes break each hour or two and standup, walk about and stretch.  Be conscious of your posture while working as bad posture will result in pain and trips to the chiropractor or for physio.

As working from home is becoming more of the norm and may become even more so as companies realize that their employees working remotely can save them money, and workers find that working from home gives them a better work-life balance.

Ever Wondered how the Government Spends Your Tax Dollars?

By Randall Orser | Business Income Taxes , Personal Income Tax , Retirement , Sales Taxes

Most of us hate paying our taxes and believe that we are paying too much.  Unfortunately, all of us have to chip in so that the federal government can provide the essential public services that we need in our daily lives. 

Torstar Community Brands took a by-the-numbers look at how the federal government spent our tax dollars between 2012 and 2018.  As with most of us it has been a challenge for the government to make ends meet, and an analysis of six years’ worth of financial statements shows that they have spent considerably more than they have taken in.  The gap has widened by $1.2 billion in the last fiscal year.  So, where did our money go?

In the fiscal year 2017-2018 government spending was as follows: 

29.84% went to National defence, crown corporations and other direct programs – including more than 100 departments and Crown corporations.  The government departments included Citizenship and Immigration, Indigenous Services and Infrastructure Canada and cost billions to operate.   

15.30% went to transfers supporting health and other social programs 

15.23% went to benefits for the elderly.  Transfers to elder benefits have been increasing over the years as these benefits programs were originally designed on a presumption of lifespan that is outdated as people are living a lot longer now.  By 2030 one in four Canadians will be a senior compared to one in seven in 2012.  However, the government still benefits from seniors as they pay income tax on their RRSP withdrawals.

14.17% went to other transfer payments 

7.05% went to benefits for children 

6.58% went to public debt charges 

5.93% went to employment insurance

5.91% went to fiscal arrangements and other transfers

Where does this money come from?

In the fiscal year 2017 -2018 sources of income for the government were as follows: 

48.98% came from Personal income taxes 

15.4% came from Corporate income taxes 

11.72% came from Goods and Services Tax

9.37% came from other revenue

6.74% came from EI revenue

2.5% came from non-resident Income tax

1.89% came from other excise taxes and duties 

1.83% came from energy taxes

1.73% came from import customs duties

Canadians are taxed from 15% for those who earn $47,630 or less up to the highest rate of 33% for those earning $210,371 and over.  Although we all like to complain that we pay too much tax compared to other countries, it is worth considering the benefits that we receive from the government that many other countries do not provide to their citizens. 

From an article by Sheila Wang in YorkRegion.com 

Working from Home – Why it can be Advantageous for Employers

By Randall Orser | Business , Cloud-computing , Employees , Small Business

If your boss is on the fence about allowing you to work from home a compelling study from Stanford economics professor Nicholas Bloom was featured in an article by Ari Surdoval in Ideas.Ted.Com showed that it can be very advantageous especially for employers. 

When most people imagine working from home they see someone in their pajamas watching Netflix on their laptop.   They believe that working from home can be shirking from home.  Professor Bloom had previously worked from home himself and knew that it was becoming more and more common around the world, so he believed that there had to be more to it than just watching Netflix.  

In the US the number of people working from home has tripled over the past 30 years and was 2.4% of the workforce in 2017.  In countries where mobile technology and improving digital connections have coincided with traffic congestion and sky high commercial rents between 10 and 20% of employees work from home for at least part of their work week.  This was true of the company Bloom used for his controlled trial to put remote work to the test.  The company was one of China's largest travel agencies with a workforce of 16,000.  The company CEO recognized that the company was losing many employees in part due to workers being priced out of the city of Shanghai and having to endure long commutes.

More than 500 employees in the call centre volunteered, about half met the study qualifications which included having a private room at home in which to work and a decent broadband connection as well has having been an employee for six months.  Those with even numbered birthdays would telecommute four days a week while the others would remain in the office as a control group.  Company managers were concerned that as the call centre workers were among the youngest in the company they might be easily distracted without supervision.  

The study lasted for nine months and the results stunned Bloom and the CEO.  The company saved $1900 per employee on office space during the study


The CRA has $1billion in Uncashed Cheques

By Randall Orser | Personal Income Tax

The Canada Revenue Agency is sitting on a windfall of more than $1billion in cheques left uncashed by taxpayers over the past 20 years.  If you are one of the 5 million Canadians who didn't cash their cheque from the CRA between 1998 and 2018 then your money is still waiting for you.

In late February 2019 the CRA launched a new online tool called "Uncashed Cheques" the goal being to find the owners of 7.6 million cheques still sitting in government coffers.  Usually cheques are forgotten because people move and do not update their address with the CRA, or some people believe that the cheque was issued to them in error, or the cheque was lost, stolen or destroyed.  It has always possible to claim money owed but it was a lot more complicated than the new system. For the launch of tax season on February 24th the CRA created an online verification tool that every tax payer can access via the CRA's website.  

Once logged into the My account service (if you don't already have it now is a good time to set it up), click on the "uncashed cheques" link at the bottom of the "Related Services" column on the "Overview" page.

Most taxpayers are not aware of this new service so you might have a pleasant surprise when you log in.  The CRA encourages you to sign up for direct deposit payments to ensure that you receive monies due to you, but if you do not register the CRA will mail a cheque out to the address that they have on file for you (so make sure it is the right one!).  

You might wonder why the CRA doesn't just send you the money if they know it is due to you.  Well, Government cheques never expire or stale date so they cannot be voided and reissued unless  requested by a taxpayer.  To date dozens of Canadians have discovered uncashed cheques ranging from a few dollars to over $10,000, check it out and good luck.

From an article by Chris Nardi in the National Post March 3, 2020

Women vs Men as Entrepreneurs – Some Statistics

By Randall Orser | Business Income Taxes , Freelancing , Home Based Business , Small Business

Small business statistics Canada showed that in 2018 there were 1,079,000 self-employed women in Canada, accounting for 37% of all self-employed people.  Almost 60% of those were in unincorporated businesses with no employees.  There were 1,781,600 self-employed men and a much smaller percentage of these (37%) were unincorporated and had no employees.

The number of Canadian women entrepreneurs keeps growing and an interesting collection of statistics shows some of the differences between men and women who run their own businesses.  

  1. On average women business owners are younger and have fewer years of management or ownership experience when compared with male business owners.
  2. Women mostly choose to start and run small business in the retail and service sectors and they are more likely to be solo entrepreneurs.
  3. Women do not make as much money as men entrepreneurs but the gap is closing, they generally make 58% less than men operating their own businesses.

From the 2016 Global Entrepreneurship Monitor (GEM) Canada Report on Women's Entrepreneurship:

  1. In Canada nearly 85% of women surveyed said they were interested in starting a business.  Most are highly educated with college diplomas or university degrees. 
  2. 13.3% of women were involved with newer businesses and 10% in established businesses (operating for more than 3.5 years).  For men the figures showed 20.3% and 7.1%.
  3. Canadian women rank 1st for involvement in newer businesses, ahead of the UK, USA and other innovation-based economies.  They were 6th for established businesses.
  4. 54% of new female businesses were in the services sector followed by business services at 28.2%.
  5. Female business owners are less likely to engage in overseas trade than male owners.  For businesses with 25% or more customers outside Canada 31.7% were run by women compared to 37% by men.
  6. For businesses engaged in innovation 35.9% were owned by women, 44% by men.
  7. The gap in expectations for job creation is now not as wide as it was in previous years and will be roughly the same for the next five years.  However the expectations for job growth is higher for male owned companies 35.6% compared to 21.4% for female owned companies.

Reasons why women start their own businesses: (Paul Lima Globeandmail.com)

  1. A flexible work schedule is a great motivator but more so for women, 63% compared to 51% for men.
  2. 36% of men who start businesses do so to get wealthy compared to only 23% of women.
  3. Entrepreneurs who are driven to start a business doing something that they love is 69% for women and 64% for men.
  4. Women are less likely than men to start a business because they want to be their own boss, and are more likely to employ a spouse or child in their business.
  5. An almost equal number of male and female entrepreneurs listed their three main challenges to starting a business as finding clients, keeping a steady workload and working long hours.

Thinking About a Business Partnership in Canada?

By Randall Orser | Business , Business Income Taxes , Partnerships

Are you considering entering into a business partnership?  A business partnership is one or more legal entities such as individuals, corporations, trusts or partnerships pooling their resources to operate a shared business.  The resources that each partner brings to the partnership does not have to be financial, it can be also be skills, labour, or property.  Although all partners will share the risk in the partnership they may or may not equally share the business profits, losses or liability, each person’s share is determined by the partnership agreement that is drawn up.  The amount of liability for each partner will depend upon the type of partnership which is created.

There are three types of partnerships available in Canada:

GENERAL PARTNERSHIP - This is the most common type and is defined as a business arrangement between one or more individuals who share the profits and liabilities of the business.  In this type of partnership all partners are fully liable for the debts, contractual obligations and torts resulting from the business operations and all can be personally sued for something that happens in the business.

LIMITED PARTNERSHIP - This is a partnership of one or more general partners who have unlimited liability and one or more partners with limited liability depending on their contribution to the business.  Limited partnerships are often set up with a corporation as the general partner and the individuals as limited partners.  A limited partner can also be a “silent” partner where they contribute financially and may provide advice, but they are not otherwise involved in the business.

LIMITED LIABILITY PARTNERSHIP – This gives the partners more protection than if they were general partners. For example, if a client wanted to sue the partnership only the partner who had worked with the client would have assets at risk.  Most provinces only allow Limited Liability partnerships in high-risk professional businesses such as lawyers, accountants or doctors where there is little overlap in the everyday business of each partner, and the protection provided varies between provinces.  Here is the link to the partnership act in BC. http://www.bclaws.ca/civix/document/id/complete/statreg/96348_01

For tax purposes partnerships are treated like sole proprietorships.  Each partner reports their own income and pays tax on their personal tax return, and reports profits and losses accordingly.

No matter which type of partnership you are considering, a written partnership agreement is a must so that all participants understand what is involved in the partnership.  

From an article by Susan Ward

Meeting a New Client in your Home Business

Four Steps to Finding New Clients for your Home Business

By Randall Orser | Freelancing , Home Based Business , Small Business

Thinking about starting a home business?  Probably the hardest task for a new business is getting those first few clients or customers.  One of the problems is that most home business owners are not savvy in marketing and hate the idea of doing “sales calls,” therefore many struggle to get enough clients.  Generating business and clients takes a lot of time, but the process can be speeded up by learning how to prospect and guide customers towards a sale or becoming a regular client.  It is reality that many prospects do not say yes on first contact with you, so you need to develop a plan to stay in touch with them until they are ready to buy.  Here are four useful strategies to use:

1.  Make sure that you zero in on your target market:  Make sure that you identify who might want what you are offering and are able to pay for it, anyone else is a waste of your time and money.  It is not enough to send your message out into the world and hope that it will stick.  Defining your most likely client by a number of criteria applicable to your business, makes it easier to find them and to send messages to entice them to check out your product

2.  Build a potential customer and client list: Just as you need a guest list for a party, you need a client list in order to have a business.  

  • Start by making a list of personal contacts for quick and easy sales, then ask these people to recommend you to their friends and contacts. 
  • Call back to your existing customers for resales, it is easier to sell to an existing happy customer than to find new ones.
  • Offer referral incentives to current customers
  • Search out potential customers on the internet and use social media such as Linked in. Participate in Trade Shows or Craft Fairs, these events are good for networking with other businesses that might fit your market.  You can also generate new customers by exhibiting your work.  Even if you don’t make a sale you will probably be able to build your contact list.
  • Join your local Chamber of Commerce and network with other businesses in your area.  Join groups involving your target market and attend workshops that might help you to build your business.
  • Purchase a lead list, however this can be expensive and usually achieves low results, but if you are in a bind this is an option.  If you do a Google search for mailing lists, you will find lots of companies to reach out to.

3.  Make personal contact with your prospective client:

  • Cold calling scares most people but it the best way to contact clients to ask them what they need and tell them what you can do for them.  Prepare yourself by writing an easy flowing conversational script to introduce your product or reason for calling.  Remember telling is not selling so don’t do all the talking. Ask questions and present the benefits of your product so that the focus of the call is on the customer.   End your call with a call to action, such as asking them to commit to a trial period, or get an email or physical address so that you can send them more information.  If they say they are not interested ask if they know anyone who might be and get a referral.
  • Email: while not as effective as a direct conversation it is less scary and a good way to introduce yourself.  Do not send just a “buy” email, instead offer something of value.  Give an explanation of who you are and provide a coupon or other incentive.  Make sure that you include an unsubscribe option in accordance with anti-spam laws.
  • In-person: Make an appointment to meet a prospect on your list or walk into their business.  You can often meet prospects while you are out and about in places such as grocery stores or coffee shops.  You should always tailor your presentation to how you can meet their needs and have sales material on hand such as brochures or samples.  End your meeting with a call to action or promise to follow-up.
  • Traditional Mail:  Similar to email snail mail is not the most effective way to get sales but it is a great way to increase awareness of your business.  Create a postcard, brochure or letter and send it yourself or hire a fulfillment house to do it for you if you have a large volume.   Don’t forget that a personally placed stamp makes the item look less like junk mail.

4.  Follow-up then follow-up again:  When you meet with prospective customers, you will probably hear NO a lot. Sometimes it is a firm no, but it could be a no, for now.  80% of sales are not made on the first contact or the second or even the third contact, it may take more that to make the sale.  It is important to set up a non-annoying system of follow-up, such as an email list or an agreement to call back in a period of time. 

You must keep track of all your communications and there are many free CRM databases available on line that you can use.  Create calendar reminders to follow-up on your phone.  It is important to build a relationship with your prospective clients which will hopefully lead to a sale.  

From an article by Mindy Lilyquist

Things you Should Know about Starting a Business in Canada

By Randall Orser | Home Based Business , Marketing , Small Business

Even though there are rules and regulations that would-be business owners need to follow in Canada, it was still ranked as the third best place in the world to start a business in 2016. In 2019 according to the World Bank’s Doing Business it only took one procedure and an average of five days to register a firm.  However, the ease of doing business ranks at 22 in a range of 1–190. 

If you are considering starting a business in Canada, here are some things you should know:

  1. You need to be a Canadian citizen or landed immigrant to start a business in Canada.  You cannot do it on a student or visitor visa or while on a work permit.  You may be able to form a partnership with other Canadians, but it does not mean that you can reside in Canada, you would need to become an immigrant.
  2. Not all businesses need to be registered.  If you start a sole proprietorship and use only your legal name as the name of your business, then you do not need to register your business with your province.  In Newfoundland and Labrador no sole proprietorships or partnerships need to register their business names.  You do however need to check if your municipality requires you to register your business.
  3. Registering your business name does not protect it from use by others.  Different forms of business ownership offer more business name protection, but none provide full protection.
  4. The Canadian system of Incorporation is very different from that in the US.  Canada has no limited liability corporations (LLCs) other than those of professionals such as doctors, lawyers and accountants.  There are also no S corporation structures in Canada.  Incorporation can be established on a federal or provincial level.  To protect yourself from liability incorporation is always the best form of ownership to consider.

Financing:  Most business start-ups are financed by their owners using their own money.  Most Canadian small business start with less than $5000 according to an Intuit Canada study of entrepreneurship.  There are few grants for Canadian start-ups and those available are usually specific to particular industries, locations such as Northern Ontario and groups of people such as aboriginals.   

Business Loans:  The long-time option for financing both start-ups and established businesses is the Canada Small Business Loans Financing Program.   However there are also other options such government sponsored and non-profit agencies that provide loans as well as private loan sources.

Small Business Taxes:  Business owners can get back the amount of GST that they pay on goods and services consumed during the course of doing business.  Small businesses do not have to register to charge and remit GST if they qualify as a Small Supplier making less than $30,000 per year.  Even if you make less than $30,000 per year you may want to register your business because otherwise you will not be able to claim back any GST you have paid out on business purchases through Input Tax Credits. 

Income Tax Deductions:  Deductions such as Investment Tax Credits are open to sole proprietors and partnerships.  In addition, home based business owners can claim The Business-Use-Of-Home-Deduction and legitimate business expenses and write these off against their business income.  

From an article by Susan Ward

Does the Canada Revenue Agency Have Your Current Information?

By Randall Orser | Personal Finances , Personal Income Tax

Yes, it’s only January but the end of April comes quickly so now is a good time to think about tax-related issues. One of those is, does the Canada Revenue Agency (CRA), have your current information. That could be a new address, marital status, and more. What has happened in your life this year, that the CRA may need to know about.

Moved? - If you’ve moved in the year, then you should’ve informed CRA as soon as you were at your new address. Even if you signed up for online mail, you should let them know about your new address; you can do this through My Account where you get your online mail.

Why is this important? Keeping your information up to date will ensure that you keep receiving benefit payments to which you may be entitled and important correspondence from the CRA. Otherwise, your payments may stop or you may not receive important correspondence, such as your notice of assessment.

CRA will not forward your new information to other government departments, except Elections Canada if you authorized such on your tax return. Contact other departments or organizations directly to give them your new address.

Marital Status?  During the year you may have gotten married, or lived with someone for 12 consecutive months during some point in the year. In either case, you need to inform CRA as soon as your marital status changes.

This also goes for getting divorced. If your marital status changes during the year and you are entitled to any Canada child benefit (CCTB) payments, GST/HST credit, or working income tax benefit (WITB) advance payments, you must let CRA know by the end of the month after the month of your divorce. In the case of separation, do not tell CRA until you have been separated for more than 90 consecutive days.

If you changed your name, let CRA know as soon as possible. Call them at 1-800-959-8281 to update our records. CRA does not accept changes of name by email or over the Internet.

Birth of a Child?

You’ve had a big event this year having a child, and you may be eligible for some tax credits from the government. The first one being the Child Tax Benefit (CTB).

To be eligible for the CCB, you have to meet all of the following conditions:

  • You must live with the child, and the child must be under 18 years of age.
  • You must be primarily responsible for the care and upbringing of the child.
  • You must be a resident of Canada for tax purposes.
  • You or your spouse or common-law partner must be:
    • a Canadian citizen
    • a permanent resident
    • a protected person
    • a temporary resident who has lived in Canada for the previous 18 months, and who has a valid permit in the 19th month
    • an Indian within the meaning of the Indian Act, if you are not a Canadian citizen

The Automated Benefits Application is a partnership between the Canada Revenue Agency (CRA) and the Vital Statistics Agency of the participating province. The CRA will use the information from the child's birth registration to determine your eligibility for benefits and credits.

You can use the Automated Benefits Application if all of these situations apply:

  • you are the birth mother of a newborn
  • your child is born in a participating province
  • you did not already apply using My Account or Form RC66, Canada Child Benefits Application

What you need to do 

After your baby is born:

  1. Complete your child’s provincial birth registration form.
  2. Give your consent to the Vital Statistics Agency to securely share the information from your birth registration form with the CRA.
  3. Provide your social insurance number (SIN) to avoid delays.
  4. Submit your form.

We recommend that you sign up for direct deposit before your baby is born to get your payments faster.

If you use the Automated Benefits Application, do not apply any other way.

Disability

If during the year you’ve become disabled, there are tax credits you can apply for to reduce your tax burden.

Disability Tax Credit

What is the disability tax credit?

The disability tax credit (DTC) is a non-refundable tax credit that helps persons with disabilities or their supporting persons reduce the amount of income tax they may have to pay. An individual may claim the disability amount once they are eligible for the DTC. This amount includes a supplement for persons under 18 years of age at the end of the year.

The purpose of the DTC is to provide for greater tax equity by allowing some relief for disability costs, since these are unavoidable additional expenses that other taxpayers don’t have to face.

Being eligible for the DTC can open the door to other federal, provincial, or territorial programs such as the registered disability savings plan, the working income tax benefit, and the child disability benefit.

Who is eligible for the DTC?

You are eligible for the DTC only if we approve Form T2201. A medical practitioner has to fill out and certify that you have a severe and prolonged impairment and must describe its effects. Answer a few questions to find out if the person with the disability may be eligible.

If we have already told you that you are eligible, do not send another form unless the previous period of approval has ended or if we tell you that we need one. You must tell us immediately if your medical condition improves.

Disability supports deduction

Individuals who have an impairment in physical or mental functions and have paid for certain medical expenses can claim the disability supports deduction under certain conditions.

Who is eligible?

If you have an impairment in physical or mental functions, you can claim a disability supports deduction if you paid expenses that no one has claimed as medical expenses. You must have paid them so you could:

  • be employed or carry on a business (either alone or as an active partner)
  • do research or similar work for which you received a grant
  • attend a designated educational institution or a secondary school where you were enrolled in an educational program

Only the person with the impairment in physical or mental functions can claim expenses for this deduction.

Home Accessibility Expenses

If you became disabled and had to make adjustments to your home for your mobility and use of the home, you may be entitled to claim expenses for doing so. What renovations or expenses are eligible and ineligible?

A qualifying renovation is a renovation or alteration that is of an enduring nature and is integral to the eligible dwelling (including the land that forms part of the eligible dwelling). The renovation must:

  • allow the qualifying individual to gain access to, or to be mobile or functional within, the dwelling; or
  • reduce the risk of harm to the qualifying individual within the dwelling or in gaining access to the dwelling.

An item you buy that will not become a permanent part of your dwelling is generally not eligible.

Eligible Expenses

These expenses are outlays or expenses made or incurred during the year that are directly attributable to a qualifying renovation of an eligible dwelling. The expenses must be for work performed and/or goods acquired in the tax year.

Work performed by yourself

If you do the work yourself, the eligible expenses include expenses for :

  • building materials;
  • fixtures;
  • equipment rentals;
  • building plans; and
  • permits.

However, the value of your own labour or tools cannot be claimed as eligible expenses. This includes someone who is related to you, unless they have a contracting business and are registered to GST/HST.

If you have had any changes in relation to the above, it’s best to inform the CRA as soon as possible. If you don’t and later changes are made to any credits you were receiving, then CRA will claw back any overpayments, and charge penalties and interest.  At the same time we always appreciate knowing about any changes so that we can keep your file up to date.

Make Tax Time Less Stressful with These Seven Tips 

By Randall Orser | Business Income Taxes , Small Business

If you took the time to make a list of all the tasks you need to do to manage your business and then ordered them in terms of how much you liked doing them, where would record management come in? Two hundred and seventy? Or even lower?
But while most of us consider business record management to be scut work and tend to give it a low priority, good record management not only makes our working lives easier, but can give us real stress relief at tax time. Here’s what you can do to make record management easy:

1. Keep your business and personal expenses separate.

Sounds easy, doesn’t it? But this is the part of record management that trips up most people. If you take a potential client out for a round of golf, for instance, is that a personal expense or a business expense? (The answer is personal, because green fees are not a deductible business expense.) Vehicles that you use for both personal and business reasons are another perennial problem.
You need to know what qualifies as legitimate business expenses and what doesn’t, and be sure that your business record management reflects this accurately.

2. Get sufficient documentation for all business expenses.

Many business people make the mistake of thinking that “lists” are good enough for record management purposes. For instance, they have a list of purchases on their credit card statements, and think that that’s good enough in terms of claiming those purchases as business expenses.
Unfortunately, the CRA (Canada Revenue Agency) is more demanding. They do not accept credit card statements or cancelled cheques as sufficient documentation for expenses when an invoice or receipt would normally be issued.
In terms of good business record management, there are two points to bear in mind:
a) Always get a receipt. Get in the habit of asking for a receipt whenever you make a purchase – no matter how small. Little expenses add up, too, and you need the documentation for your business records.
b) Label your receipts, if necessary. There are still businesses around that hand out receipts that don’t have anything on them except the date the item was purchased and how much it cost – which isn’t very helpful when you’re staring at a receipt trying to figure out what the item in question was and which business expense category it fits into.
When you get a receipt, look at it and write the missing/relevant information on it, such as what the receipt is for and the expense category.

3. Get a separate bank account for your business – and use it.

While the fees for business bank accounts are notoriously high compared to personal accounts, a business bank account is absolutely necessary for good business record management. A business bank account helps you keep your business and personal expenses separate. You will deposit all your business revenues into the business account, and withdraw any business-related expenses or payments from the business account only.
What kind of business bank account should you get? A chequing account – preferably one that delivers monthly statements and returns your cancelled cheques to you.
Business cheques help make your record management easy because you can use the memo line on the front of each cheque to document the business purpose of the expense.

4. Have and use a separate credit card for business expenses.

Using your personal credit cards for business purposes will swiftly drop you into a record management quagmire. A business credit card greatly simplifies your business record management by helping keep your personal and business expenses separate. (It also helps make your business look more professional.)

5. Keep a mileage log of your business travel.

If you use any of your vehicles for business purposes, a mileage log will be a big help in record management. Note the mileage (or kilometer) reading on the odometer at the beginning of the year and then enter the mileage by date each time you use the vehicle for a business purpose.
Keeping your mileage log in the glove box of your vehicle will make this easy. If you have more than one vehicle that you use for business purposes, keep a mileage log in each.

6. Keep all your business records for a particular tax year together and in one place.

Having your business records scattered all over the place is a real time-waster when it comes to accounting or preparing your taxes, and organizing your business record management system by fiscal year will make it much easier to find the business records you need when you need them.

7. Keep your business records for the correct length of time.

For some reason, there seems to be a lot of confusion about how long you must keep your business records. For tax purposes, “if you file your return on time, keep your records for a minimum of six years after the end of the taxation year to which they relate” (CRA).
This six-year period starts from the last time you used the business records, not from the time the transaction occurred.
The CRA also has rules about the destruction of business records; see Canada Revenue Agency’s website for details.
These seven things you can do to make your record management easy aren’t difficult. Like a lot of the administrative business related to running a business, they just require establishing good habits and persistence. But if you apply these rules of good record management now and follow through, you’ll see a huge difference next tax time and your accounting will be easier all year long.