All Posts by Randall Orser

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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.

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 the 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 | Business Income Taxes , Home Based Business , Personal Finances , 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.

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.

Compliance

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.

Are You Moving This Year?

By Randall Orser | Personal Finances , Personal Income Tax

Moving is probably one of the most strenuous things we do in our lives, and, sometimes expensive. The government has seen fit to at least let you write-off your moving expenses when it’s for school, a new job, or starting a business. Of course, with anything the government does there are conditions. And, for 2016 tax year they’ve added a new twist, you must state on your tax return that you have sold your principal residence.

Can you claim moving expenses?

You can claim eligible moving expenses if:

  • you moved and established a new home to work or run a business at a new location; or
  • you moved to be a student in full-time attendance in a post-secondary program at a university, college or other educational institution.

To qualify, your new home must be at least 40 kilometres (by the shortest usual public route) closer to your new work or school.

What can you write off as moving expenses?

If you qualify, you can claim reasonable amounts that you paid for moving yourself, your family, and your household items. Not all members of your household have to travel together or at the same time.

Transportation and storage costs (such as packing, hauling, movers, in-transit storage, and insurance) for household items, including boats and trailers.

Travel expenses, including vehicle expenses, meals, and accommodation, to move you and your household members to your new home. You can choose to claim vehicle and/or meal expenses using the detailed or simplified method.

Temporary living expenses for up to a maximum of 15 days for meals and temporary lodging near the old and the new home for you and your household members. You can choose to claim meal expenses using the detailed or simplified method. If you choose the simplified method, although you do not have to submit detailed receipts for actual expenses, we may still ask you to provide documents showing how long you stayed at the temporary lodging.

Cost of cancelling the lease for your old home, except any rental payment for the period during which you occupied the residence. However, you cannot claim rental payments for any period before the cancellation of your lease, whether or not you occupied the home during this period.

Incidental costs related to your move which include the following:

  • changing your address on legal documents;
  • replacing driving licences and non-commercial vehicle permits (not including insurance); and
  • utility hook-ups and disconnections.

Cost to maintain your old home when vacant (maximum of $5,000) after you moved, and during a period when reasonable efforts were made to sell the home. It includes the following:

  • interest;
  • property taxes;
  • insurance premiums; and
  • cost of heating and utilities expenses.

The costs must have been incurred when your old home was not ordinarily occupied by you or any other person who ordinarily resided with you at the old home just before the move. You cannot deduct these costs during a period when the old home was rented.

Cost of selling your old home, including advertising, notary or legal fees, real estate commission, and mortgage penalty when the mortgage is paid off before maturity.

Cost of buying your new home if you or your spouse or common-law partner sold your old home because of your move.

It includes legal or notary fees that you paid for the purchase of your new home, as well as any taxes paid (other than GST/HST) for the transfer or registration of title to the new home.

Calculation methods

Detailed Method

Meal expenses
If you choose to use the detailed method to calculate your meal expenses, you must keep all your receipts and claim the actual amount that you spent.

Vehicle expenses
If you choose to use the detailed method to calculate your vehicle expenses, you must keep all receipts and records for the vehicle expenses. Claim the actual amount that you spent for your moving expenses during the tax year.

Simplified Method

Meal expenses
If you choose to use the simplified method to calculate your meal expenses, you may claim a flat rate per person. For 2016 tax year it’s $17/meal up to a maximum of $51/day (including sales tax), and can be Canadian or US dollars. Although you do not need to keep detailed receipts for actual expenses, we may still ask you to provide some documentation to support your claim.

Vehicle expenses
If you choose to use the simplified method to calculate the amount to claim for vehicle expenses, multiply the number of kilometres by the cents/km rate for the province or territory where the travel began. For 2016 tax year it ranges from 43.5¢ for Alberta to 59¢ for the Yukon. CRA may still ask you to provide some documentation to support your claim. You must keep track of the number of kilometres driven during the tax year for the trips related to your moving expenses.

New for 2016 tax year is Reporting the sale of your principal residence for individuals

On October 3, 2016, the Government announced an administrative change to Canada Revenue Agency's reporting requirements for the sale of a principal residence.

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, generally due by late April 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.

This could have a profound effect on anyone who runs a business or rents out part of their principal residence.

If only a part of your home qualifies as your principal residence and you used the other part to earn or produce income, 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, as long as the split is reasonable.

In other words, you are going to be taxed on the gain that relates to the business part of your home. For example, if you’re writing off 10% of your home for business then 10% of the gain must be included in income (less expenses for selling the home).

If you moved during the year, remember you may be able to write off your moving expenses, so keep all your receipts, and keep track of your mileage (remember must move over 40km away).

Do You Think with Your Right-Brain or Your Left?

By Randall Orser | Small Business

Getting business liftoff with a brilliant website, fancy storefront, or plentiful first-time sales is terrific, but for long-term success there are many more pieces to add to the business-building puzzle.  Building a business is just that—building an entity one building block at a time.

What stage of the building process are you in:  development, revision, maintenance, or expansion?  How do you measure your progress?  How will you know when you’re slipping off-course or need a change of direction?  How do you course-correct?

Charting the Course from Various Angles

How you measure your results may vary depending on the type of thinker you are.  Are you a right- or left-brained dominant thinker?  Looking at how these two types of thinkers respond to situations can offer insight into business dynamics and perhaps help you understand why you do what you do.  Have a look at these two approaches to see if you can identify yourself or your business partner(s) in the descriptions:

  1. Right-brained thinkers are artistic or creative.  They are full of ideas.  They see possibilities.  To some right-brained thinkers, facts and figures are confining obstacles.  They love trying new things.  They love seeing things in full colour.  They’ll go to great lengths to make their creative ideas work.
  2. Left-brained thinkers, on the other hand, are practical.  They see business in dollars and cents.  Surveys, historical proof, traffic counts, facts, data, and the like, are important to them for decisions making.

So, What’s Better?

A good left-brained thinker will look for underlying causes of plummeting numbers, look for logical actions to take, and course-correct.  He may be good at saving the business money and protecting profits.  He may be instrumental in securing ongoing financing.  A left-brained thinker is good at keeping the business in the black.

This practical thinker may be tempted towards knee-jerk reactions though.  He might become tempted to take drastic measures to bring the numbers up.  The left-brained thinker is cautioned, though, not to throw the baby out with the bathwater.  Perhaps tweaking a product or service can help recharge sales.  Firing the best employees in a quick-ditch effort to save money on payroll might end up costing more money in severance payoffs, legal bills and then rehiring and training costs further down the road.

Practical thinkers can benefit from having the viewpoint of right-brained thinkers who are possibility and bigger-picture oriented.  The right-brained thinker may be skilled at seeing untapped markets or have just the right trick up his sleeve that might boost sales.  While the left-brained thinker makes decisions based on logic, he’ll be wiser to consult with his right-brained counterparts in order to make the most prudent decisions that align with the values and long-term goals of the business.

The right-brained thinker may be willing to hang in there long enough and through difficulties to see his ideas fly.  On the downside, he may have so many varying ideas that he fails to focus or launch the right idea in the right niche at the right time.  The right-brained thinker may benefit from having the input of a left-brain thinker to help him measure the practicality of his dreams against the cost of doing business and profitability.

Consider All Viewpoints

Typically, individuals with a strong left-brained bent may have trouble understanding the enthusiasm of their right-brained counterparts.  They can sometimes become impatient with creativity and find it hard to invest in mere concepts.  Equally, right-brained creative types can become impatient with numbers-driven left-brained counterparts.  It takes awareness to see the dynamic of this type of dual thinking in play.  It’s important that each personality type respect and value the contributions of the other.

A good mix of right- and left-brained thinking is ideal.  As a business owner, you may be well equipped with a little of both.  If not, building a balanced team or counting on outside business coaches or advisors to fill the gap may be beneficial.

Develop Consistency

Making changes too often either because of a lack focus, or as a knee-jerk response to falling profits, may actually circumvent your ability to build a solid reputation.  Customers might never fully understand what your business is about if you continually hopscotch around.  There won’t be consumer buy-in if they perceive you as unstable, flighty, lacking confidence, or if you send conflicting messages.

Take a personal business inventory now.  Choose your focus.  Narrow down your moneymaker and your niche.  Craft a vision that will keep you on course and help guide you when difficult decisions need to be made.  Be aware of economic trends, examine your operating cycles, and be willing to ride a few rough waves.  Use a balance of right-brained creativity with left-brained facts and evaluate your progress from a variety of viewpoints.  Most of all, remember that a successful business is never truly finished being built.  It takes ongoing fine-tuning to get it where it needs to be.

Grow Your Business with these Five Pricing Strategies 

By Randall Orser | Small Business

As a small business, even the small advantages can help in a big way. A larger business doesn’t have to make every dollar count, though doing so is still prudent, as it will probably have little impact on their bottom line. Your businesses performance will be based on how you price your products, so take advantage of as many of these strategies as you can.

Use Visuals to Make Your Sales Prices Standout

While pricing is generally literal, the human mind does have some impact on how we see that pricing. As many pundits like to point out, people buy on value they are getting from your product/service more than what they are paying. Making your prices standout visually, helps differentiate the new price from the old one. Using a different font or changing the colour of the sale price can garner more sales because the customer’s mind instantly realizes that something is special about it.

Using the 99¢ Practice

The human mind works in mysterious ways, and sees $49.99 and $50.00 differently, even though it’s only a penny different. The former price looks like it’s a dollar cheaper since it starts with 4, while the latter figure starts with 5. Combine that with a price that ends with 9, and you end up producing more sales. Using pricing that ends with 9 makes people believe that you’re cheaper, and that lower first number endorses that.

Put Cheaper Items Next to an Expensive Items

Pricing isn’t always about being cheaper than the other offering. Many times, people associate a higher price as a gauge of quality, and this can be to your benefit. You can use this to your advantage by offering two or three versions of similar quality of your product or service, and each progressively more expensive. Customers generally opt for the more expensive one when two are offered, and take the middle one when three are offered.

BOGO Pricing

Everyone loves a good deal, however small business is wary of giving away the farm, so to speak, with too cheap pricing. When you start giving deals, and get carried away, you have less money for which to grow. BOGO pricing, or Buy One Get One, can be worth doing as people are far more likely to buy.
Let’s face people are a little greedy, and when they feel they’re getting a great deal, they emphasize the possible value. It becomes not about whether it’s actually a good purchase, but about getting more than they think they should for that price. Also, offering discounts on future purchase can work too.

Prestige Pricing

You can play on prestige rather than greed. Pricing according to prestige numbers, such as 50 or 100, can create sales simply because it feels right. Flat numbers are more easily managed mentally, and suggest security. Your customer isn’t juggling numbers to see if it’s a deal; they get exactly what they want at the price they anticipate.
Your business may live and die by your pricing strategy. You set up your pricing based on your product’s or service’s value; however, your customer doesn’t care what you think your price should be. They only care about WII-FM (what’s in it for me). Once you understand that, the sooner you can chose your pricing strategy.

Home-Based Business Tax Avoidance Schemes

By Randall Orser | Business Income Taxes

Scam home-based businesses and tax avoidance promotions have gained popularity over the last few years for a variety of reasons, including:
• The desire of individuals to reduce the amount of taxes they pay.
• Unscrupulous promoters, selling tax avoidance and audit assistance packages.
• Taxpayers being advised they can deduct all or most of their home and other personal assets as business expenses.
Most taxpayers with home-based businesses accurately report their income and expenses, while enjoying the benefits that a home-based business can offer. However, some individuals have received advice that they can operate any type of unprofitable “business” out of their home and claim personal expenses as business expenses. Non-deductible personal living expenses cannot be transformed into deductible business expenses regardless of how convincing the information in marketing materials may seem.
The following are a few examples of items that are generally not deductible as business expenses:
• Deducting all or most of the cost and operation of a personal residence. For example, placing a calendar, desk, file cabinet, telephone, or some other business-related item in each room does not increase the amount that can be deducted.
• Paying children, a salary (e.g. for answering telephones, washing cars, etc.).
• Deducting education expenses from salaries paid to children wrongfully claimed as employees.
• Deducting excessive car and truck expenses when the vehicle was used for both personal and business use.
• Deducting personal furniture, home entertainment equipment, children’s toys, etc.
• Deducting personal travel, meals, and entertainment under the guise that everyone is a potential client.
Any investment scheme or promotion that claims to allow a person to deduct what would normally be personal expenses, and not ordinary and necessary business expenses, should be considered highly suspect. As always, a business must truly exist prior to claiming expenses.
In the past few years Canada Revenue Agency (formerly Revenue Canada) has hired 5,000+ new auditors, and one area that they are delving more into is people who work full-time and operate a home-based business (mostly multi-level marketing schemes) that never makes money or has little revenue and high expenses.

Avoid These Five Small Business Errors at all Costs 

By Randall Orser | Small Business

As an entrepreneur, you are simultaneously your own greatest asset and your greatest enemy. Your successes will take the start-up to new heights. Your mistakes, on the other hand, can take it down. When an employee makes a mistake, it’s often rectifiable. A misplaced shipment is easy to handle. Mismanagement from the boss, on the other hand, is a problem that can’t easily be fixed.
Knowing what to not do is as important as knowing what to do. A single mistake can undo numerous good decisions. Here are a few things you should avoid.

1. Mistaking Leadership for Dictatorship

As the entrepreneur, you’re expected to lead. No one sees the product and its future the way you do. You were the one who found a need and figured out how to fill it. Who else can lead? The problem many entrepreneurs face is not a fear of leading, but mistaking it for dictatorship. Instead of looking to inspire their employees, they dominate them, barking out orders and expecting complete compliance.
While your employees are supposed to help you achieve the start-up’s goals, they’re not slaves. They’re there for their own reasons. Some of them are there because they need a paycheck and you saw potential in them. Others are there because they see potential in you and in the start-up. Whatever the reason, you must remember that your employees are people as well.

2. Focusing on Money Instead of Freedom

Your foremost goal for the start-up is to turn a profit. However, your end goal isn’t money. Money is a tool, a stepping stone towards other things. What you want is what money brings: freedom.
It’s easy to think that money’s synonymous with freedom, especially when things are tight. When you don’t have money, it’s easy to think that financial freedom leads to actual freedom. This can lead to a number of bad decisions, such as giving up time with family to work on the start-up. Money is a tool or even a byproduct of your efforts, not the goal.
Focus on business grow. Make better products and you’ll get money. Cut corners in an attempt to raise money quickly and your company will eventually suffer.

3. Believing That The Customer is Always Right

The customer is important. As an entrepreneur, everything you do must revolve around them. Product development must be done with the end user in mind. Your marketing campaign must attract your target demographic or you risk getting the wrong people. They’re important and integral to your success . However, that doesn’t mean they’re always right.
Acting as if the customer is always right confuses your branding and message, and can result in hyper focused development revolving around a very vocal minority. Instead of thinking the customer should determine how the office runs, think about honoring them. You’re there to serve them, but they don’t always know better.

4. Failing to Define Success

Many entrepreneurs end up failing simply because they don’t know what they want. They have a great idea, a receptive market, and a good business plan, but they don’t have clear goals. The company is successful in a technical sense. It didn’t collapse and it exists, but the lack of an overarching goal gives it little direction. It’s hamstrung.
Figuring out what success looks like and what it means to you. Boil it down to something tangible, something you can recognize. If you can, look for measurable metrics, such as a rating or a number of yearly sales. It doesn’t matter what it is, as long as it’s success according to your definition and not because it’s what other successful businessmen said it was.

5. Not Communicating Well

The thing with communication is you can feel entirely confident and sure that you’re getting the right idea across and still end up confusing everyone in the room. Effective communication is more difficult than it sounds. It’s more than being passionate — it’s about leading people down the same thought process as you so they either arrive at the same conclusion or they have a picture in their heads identical to the one in yours.
When communicating, it’s best to use facts, something that isn’t reliant on your perception of things. By using a common frame of reference, you can minimize misunderstandings. Everyone understands that the ruler is 12 inches long, but they might have a different idea of what a “large stick” means.
Succeeding as an entrepreneur is more than avoiding mistakes. However, avoiding these mistakes will allow you and your start-up to build up the necessary momentum to survive those turbulent early months and years. Keep an eye out for these and you should do fine.

Nine Simple Ways to Avoid a Grueling Tax Review

By Randall Orser | Sales Taxes

Undergoing a tax review is one of the most frightening and harrowing experiences any adult can endure.  A tax review probes deep into financial and personal matters, and if errors and omissions are discovered in tax returns, the result can be imprisonment or a fine, possibly both.  More frightening still, the aftermath of tax evasion can be just as harsh for innocent mistakes as serious attempts to defraud the authorities.
So, what can an honest citizen do to prevent a tax review?  For starters:
1.  Take your time completing your accounts and preparing your tax return.  Rushing to meet an imminent submission deadline is a major cause of mistakes and omissions, and subsequent harsh punishment.
2.  Complete your accounts and prepare your tax return when you’re wide-awake and free from distractions.  Children playing noisily in the background, customers demanding your attention, falling asleep at your desk, all can lead to errors and ambiguities and a subsequent visit from the taxman.
3.  When you think your accounts and tax returns are problem free, put all your paperwork to one side, preferably at least four weeks before the final date for submitting tax returns.  A week later, study your figures; check your calculations, correct errors you didn’t spot earlier, enter details you overlooked previously.  Check again two weeks before tax submission deadline, and if all looks good, submit your return right away.
4.  Get a certificate of posting for submissions by post, make a screenshot of returns processed online.  Then when your return goes missing in transit, you can prove you submitted on time, and avoid a potential tax review.
5.  Submit your tax returns on time, every time.  Submitting late might suggest you rushed your submission, and possibly made mistakes.
6.  If you don’t use an accountant, consider getting one, preferably with expertise in your area of business and on good terms with the tax authorities.  Search online for someone with a good reputation for filing submissions on time and without making mistakes, as well as for signs an accountant may have been jailed or expelled from a professional association for fraud or misconduct. Key the name of a potential accountant into the search box at google.com, then study the first three or four pages of search returns where most derogatory entries are likely to be found.
7.  If you submit something unusual in your tax returns, such as a major drop in income or an unusually high expense, explain it in a note accompanying your return or in the appropriate location on your submission form.   The more you tell the taxman, the less likely a review will be opened to determine reasons for gaps and irregularities in your tax return.
8.  If paper filing, prepare your submission on a photocopy of the official tax return form before preparing your final return.  Alternatively, use pencil on the original form so errors and ambiguities can be edited later.  Lots of deletions and amendments to an original form suggest a disorganized individual, and potentially more mistakes for the taxman to find.
Hopefully, you’re electronically filing your return. If so, then review the return before you file and print a copy of the confirmation as proof you filed your return.
9.  Add tips and cash payments, also barter transactions to your declared earnings, so the taxman doesn’t feel obliged to ask about income you may have overlooked or considered tax-free. If doing barter, exchange invoices so you have an audit trail.
For the record, almost every form of income should be declared on your tax return, except income from sales of personal goods.
All this time and effort spent preparing your tax return shows you are an honest and law-abiding citizen, someone who does not deserve special attention from the authorities.