Category Archives for "Small Business"

Do you Have to Declare Hobby Income?

By Randall Orser | Personal Income Tax , Small Business

Did you know that what you think is a hobby the CRA may see as a business?  If you are making a profit from your hobby, then it is a defined as a business by Canada Revenue.  It does not matter if your hobby is small, you still have to declare any income from it on your tax return.

However, it may not always obvious to you whether your hobby is taxable or not.  For example:  

  • Producing crafts to sell at a Christmas sale might be seen by the CRA as a business, but if you are actually spending more on the materials to make the crafts then you ARE NOT making a profit, so you don’t have to declare any business income.  
  • However, in a second example you may be buying items at clearance or garage sales, marking them up and reselling them on-line.  In this example you ARE making a profit, so you need to declare this as income.

The income you make must be reported on Form T2125 Statement of Business or Professional Activities, which is included with the T1 income tax return package.

Doing this extra paperwork does have some major advantages.  You can write off your business expenses against income, including business-use-of-home expenses, meals and entertainment expenses, motor vehicle expensesetc.  You can also use the Capital Cost Allowanceto annually write off a portion of assets.  To claim these expenses, you must keep track of all your sales and expenses and all of your receipts.

If you have income from a regular job, the net loss from your hobby gets deducted against your total income which may result in a lower tax bill.   However, there are limits: you cannot continue to write off losses from your hobby year after year without the CRA using the profit test to see whether or not your activities are conducted with a “reasonable expectation of profit”.

 From an article by Susan Ward


Inexpensive ways to Market your Business

By Randall Orser | Small Business

Promotion is such a crucial part of your business that even though it might not be your favourite activity you should spend at least an hour a day either promoting or planning how to promote your business.  Getting the word out is so important that however you do it, it must be done continuously.  Business promotion should be part of your business budget, but it doesn’t have to be expensive.  Here are some inexpensive ways to promote your business that mostly cost only your time. 

  • Business Communications – You have business cards, but you also send out a lot of other documents. You need to make sure that your business name, logo, contact information, social media links and web address are on all documents that you send out either printed or electronic. It is easy to update electronic documents such as email with promotions, special prices, or company news.  It then becomes not just an email but a business promotion tool.
  • Turn your Vehicle into a Mobile Billboard – Use vehicle wrap to advertise your business. Hundreds if not thousands of people see your vehicle every day which makes this a very inexpensive way to promote your business.
  • Use Social Media – Social media platforms are a great way to promote your business.  To get started, create a social media plan.  It is important to post regularly, include videos of your products which can also be posted on YouTube.
  • Blogging and Writing Articles – Write blogs and articles specific to your business which will be valuable information for the reader.  Include a short biographical note about you and your business to make it more personal. Although you will mostly post these blogs to your own website think about placing your blog on another website related to your business as a guest blog, but make sure that it is a professional looking site that gets lots of traffic otherwise it will not help and could in fact hurt your business.
  • Use Buddy Marketing – This involves joining up with another business that compliments your own. Pooling your resources to create a marketing program can extend your reach and bring you into contact with a new pool of potential customers.  
  • Give out Freebies - People love to get freebies, you can give out items such as pens, hats etc. to promote your business and also use them as customer “rewards”.
  • Promote your Business by Giving a Seminar or Presentation – You have expertise that other people want so why not share it and promote your business at the same time? Many Government sponsored organizations such as Business Service Centres, Economic Development Centres and non-profit programs are always looking for experienced business people to give presentations.
  • Promote Your Business Through your Leisure Activities – Promote your business by wearing a T. Shirt that displays the name of your company.  If your kids play on a sports team, consider becoming a sponsor and get your name on the team uniforms.  Get in the habit of promoting your business wherever you go to build word-of-mouth. If you are involved in a group activity try and include your business information on their newsletters so that you are letting people know what you do and how it could benefit them.
  • Promote your Business on a Talk Show – your local radio station or tv station may have programs where you can appear as a guest expert.  

These are just a few of the ways that you can promote your business without spending huge amounts of money although spending more can pay off as well and don’t forget that promotion expenses are tax-deductible.  

From an article by Susan Ward

Top New Years Resolutions for Business Success

By Randall Orser | Small Business

As we begin a new year, many business owners will consider the performance of their business in the past year and think about how they want to progress going forward. One big question to ask yourself is “Do want to continue building on your success?” or “Do you want to take more time to enjoy the success that you already have?”  Here are some ideas to help you to strike a better balance between your work and your life in 2019.

  • Learn to Delegate– you do not need to do everything that is needed to run your small business, let someone else do some of the tasks.  For example, if you are a one-person operation why not hire a bookkeeper to take care of your accounting and even pay your bills for you?
  • Promote your Business Regularly and Consistently – This is one of the tasks that often falls to the bottom of the to-do list but if you want to attract new customers then promotions must be a priority.  Again, consider hiring a marketing expert to do your social media and website updates. Otherwise create a marketing plan for the year so that you know what you need to promote each month and how you are going to do it.
  • Make Business Planning a Weekly Event – Set time aside each week go review what worked and what didn’t work so that you can set a new direction for your business.  This will help you to avoid mistakes stay on track resulting in more focus and less stress.
  • Learn Something New – Whether or not it is related to your business, learning something new adds to your skills and gives you a new interest in life.  This is important in helping to achieve a work-life balance. In addition, you have the opportunity to meet new people who may become customers.
  • Join a New Business Organization or Networking Group– Meet new people either in person or online and share ideas which will benefit your business.  Approach these meetings with a strategy so that you get the most out of them.
  • Give Back to your Community– Volunteering or donating within your community will grow goodwill for your business.  
  • Put Time for yourself on your Calendar – Make time to recharge and refresh yourself and stick to that commitment it is important for your physical and mental health to take time off from working.
  • Set Realistic Goals – Goal setting is valuable as long as it leads to success and not failure. Make sure that the goals that you set are achievable.  Unrealistic goals can lead to frustration and failure.
  • Don’t Just Make do Get a New One – If you have equipment in your office that is making your work more difficult then replace it.  If you are overwhelmed with work, hire a new employee to lighten your workload, it will be worth it.
  • Figure out What Works and What Doesn’t and Make Changes – this might mean dropping a product line or a supplier or a business relationship.  Don’t waste time and energy trying to make the unworkable workable, move on.

Achieving a good work-life balance takes time and you have to keep working on it.  Adopting the above techniques will help you to feel better and have more energy to devote to your business and make it successful. 

From an article by Susan Ward

5 Early Steps to Get Ready for Tax Time

By Randall Orser | Happy New Year , Personal Finances , Personal Income Tax , Small Business


While you are nursing that hangover or catching up on sleep might not be the best time to remind you that the last year is over and that you need to start thinking about filing your taxes! but here it is!

You are probably not too excited about filing your taxes but look at this as a great opportunity to review your finances and getting organized early will save you the pain and hassle of doing everything at the last minute.  

Here are some simple steps to help you to reduce your stress and get yourself on track for filing your taxes by the end of April or even a little earlier!

  1. Make an Account List:  Start by making a list of all your financial accounts. If you have a small business, you need to create both a personal and a business account list.  Include bank accounts, credit cards, investments, retirement, and every other financial account you have. Unused but still open accounts should be included on your list.  If these accounts are old and inactive now is a good time to close them. Make sure all of your accounts are accounted for in your bookkeeping software, so you don’t miss any transactions. If you forget to write off an eligible business expense, that is money you are giving money to the CRA that should be in your pocket!
  2. Get your Bookkeeping up to date:  If you have been ignoring your bookkeeping for a while, it’s time to get caught up! You’ll need copies of your annual income statement, which is the core document used to prepare your business taxes.  You might also need your balance sheet and depending on the registration of the business you run, you may also need to list assets and liabilities on your taxes, which comes from the balance sheet. Remember that errors in your bookkeeping can lead to errors on your taxes. You don’t want to pay too much and lose out on profits you should keep. Similarly, you don’t want to underreport and find yourself on thewrong side of an audit, fines, and penalties. Making sure your books are done, and done accurately, is key to tax season success.  If bookkeeping is not your thing, it might be a good idea to enlist the help of a professional bookkeeper who will keep your records in order for you so that everything is ready for tax time.
  3. Put Together a Tax Form Checklist:  Make a list of all the sources that you expect to get tax forms from.  These can be from bank accounts, investments, educational institutions and the government. You can put your checklist in an Excel spreadsheet or Google Sheets for easier access using your phone. Whichever method you use, make sure you have all the forms you need before you file your taxes, or you will have to file an update to your return if something is missed and this can be a big hassle.
  4. Create a Tax Form Folder (digital and physical):  When the forms arrive, it is easy to set them aside to open later then misplace them.  Train yourself to open everything right away and file it in a folder either physically or digitally.  You can use Dropbox to store digital copies and add in scanned paper copies so that you have everything together.
  5. Choose your Filing Method:  Decide whether you want to do your taxes yourself online, or you want to hire a bookkeeper or accountant to do them for you. Think about how knowledgeable or comfortable you are about doing your taxes.  If the answer if not very, you should use a professional to avoid making mistakes or missing deductions.

Taxes don't Have to be Terrible! 

You may dread tax season, but taxes don’t have to be a horrible part of your finances and your business. You do them every year, so find ways to make the process easier and faster.  Preparation well in advance can be the key to a successful filing and just think how satisfying it is when it is all done for another year! 

From an article by Eric Rosenberg

Top Small Business Opportunities for 2019

By Randall Orser | Small Business

Are you thinking about starting your own business next year? Here are some of the best small business ideas for 2019, many of which can be operated as a home-based business.  
All these opportunities

  • Have the potential to be profitable now and in the future
  • Will do well even when the economy is uncertain
  • Do not require a high level of education or years of experience.  Some need trade school training, a university degree or a prior apprenticeship, others only need experience and a passion for the industry
  • Do not require a lot of start-up capital but do need lots of dedication, hard work, perseverance and a desire to succeed!
  1. Fulfillment by Amazon – this program allows you to market your products through Amazon and takes the headaches out of running an online retail business.  In exchange for fulfillment and monthly storage fees Amazing handles storage, packing, shipping, returns, customer service enquiries as well as listing your product on their website.  Once your listing is live and sales begin you receive your portion of the proceeds on a weekly basis.  
  2. Skilled Trades  Nowadays being in the trades can be a very well paid and rewarding career choice.  As trades people are retiring there is a huge demand for talented workers and the nature of skilled trades make them ideally suited for self-employment.  Many can be operated as home-based businesses as the work is actually done at the customer’s job site.  Start-up costs are relatively low, and most trades cannot be automated to any degree ensuring future job security.  There is also the opportunity to travel to other locations to receive higher compensation.
  3. Software Engineering and Development – The demand for software engineers and developers is expected to increase by 17% by 2023 and the median pay in 2017 was over $100,000 making it a great business opportunity for those who have these skills. Many people start off as employees and then become self-employed contractors.  Using Cloud Computing and remote access it is easy to make this a home-based business.
  4. Meal Kit Sales and Delivery – Meal kits have become very popular with busy people and the industry is expected to reach $10 billion in sales in the US by 2020. Meal kit suppliers usually source ingredients from local farms which also creates business for small growers and delivery providers to pick up and deliver to customers.
  5. Bike Sales, Service and Rentals – Bicycling is the second most popular outdoor activity by frequency of participation in the US.  This has resulted in $81billion being spent annually on biking.  This is a great opportunity for the entrepreneur who loves cycling.
  6.  Senior Care Services – Senior care ranks as one of the best business opportunities as people are living longer. Many of these people create a wealthy demographic that can afford to pay for services to help them to maintain their lifestyle including driving, household chores, property maintenance, landscaping and caring for pets.  There are many opportunities for those who are interested in starting their own business or being part of a franchise.
  7. Gourmet Coffee – If you think that you could not compete with Starbucks you it might be easier than you think. You need to open your coffee house in a convenient location for foot, cycle and vehicle traffic with lots of parking. You must offer a pleasant atmosphere including an outdoor patio. Serve a high-quality beverage made from small-batch specialty coffees that are served by trained baristas so that the product is always consistent and just sell brewed coffee and pastries do not try to compete with fast food outlets.
  8. Facilities Support Services  Providing a full range of services for businesses including cleaning, security, building maintenance, painting, and moving is an industry expected to grow by 30% by 2026.  All you need is a background in maintenance and good organizational skills.
  9. Food Trucks – Food trucks are no longer just hot dog stands they now provide healthy nutritious food, and many have their own specialties such as vegetarian or ethnic. Ingredients are usually locally sourced and often have a seasonally changing menu.  If you are able to create great food this could be a good business opportunity for you.

So what are you waiting for? Start writing that business plan for 2019!

From an article by Susan Ward

How to Get More Christmas Sales for Your Small Business

By Randall Orser | holiday season , Small Business

During the Christmas Season there is only one thing that matters to retailers - the sales graph.  This can be make-or-break time for many small businesses and it is important that those sales climb as steeply as possible.

To get greater sales it is obvious that you need to get more customers. How can you get more customers? You need to make sure that more people see or experience the quality or unique product or service that you are offering so that they will buy. With a little effort and ingenuity, you can get potential customers into your store, and it might not be as hard as you think.  Here are a few ideas to help you to create your Christmas Rush:

Have a Sale

  • Most retailers have a Christmas Sale and nowadays they are not waiting for Boxing Day to do it.  Customers are inundated with Christmas advertising, so you need to make your sale stand out from the rest and be an event that everyone will want to attend. How can you do that?
  • Offer a big discount on a popular item for just one day.
  • Decide if you want to make it a discount or a free gift with purchase. 
  • Make sure your discount is worthwhile, people are not interested in only 10 or 20% unless it is a storewide sale.

Advertise your sale heavily on the best channels for your customers, social media, radio, etc. people need to hear about it to show up to your store.

Hold an Event  -  Create an event which ties into your product or services, for example a free cooking or home improvement class with a guest presenter, or a wine and food tasting with a chef.  Think about how this event will benefit the customer making them want to attend.

Use an Email Campaign - Social Media is a good way to get the news out, but an email blitz has been shown to be the most effective way to attract customers. Most businesses already send out an email newsletter so make sure it includes details of any sales or specials at Christmas. Feature items that customers will want as a limited quantity and create a demand.  You can also send out separate emails to “special” customers making sure that you personalize them offering them extra discounts not available to everyone, this makes them feel special and encourages them to shop with you.

Create an Attractive Window Display that is unique, eye-catching and foot-stopping to catch foot traffic that might usually walk right by your store.  Work your crowd, offer cookies or a free hot drink to people who are admiring your display to bring them into your store.

All of these strategies can be used as part of your Christmas Season marketing plan, but whatever you decide to do the most important thing is to get the word out to your target market and invite customers to your physical or virtual store.  Without customers your Christmas Season will be a non-event and not a good gift for your bottom line!

From an article by Susan Ward 

Are you Planning to Give Gifts to Your Employees this Holiday Season? Do You Know What is Taxable?

By Randall Orser | Business Income Taxes , holiday season , Payroll , Personal Income Tax , Small Business

At this time of year many employers give a Christmas or annual bonus – did you know that this is a taxable benefit if paid in cash or a cash equivalent such as gift cards?

You might think about giving your employees gifts instead of cash bonuses so that both of you will benefit on your Canadian income tax.  Employers can use the total cost of the gift as a tax deduction and employees do not need to declare the cost of the gift as part of their taxable income.

Under CRA rules all gifts to employees are considered to be taxable income except for the following exemptions:

1.   It is non-cash and less than $500 in fair market value per year and only given for the following reasons:

  • A Religious or other special event
  • Birth of a child
  • Wedding
  • Birthday

2.   It is a non-cash long standing service award valued at less than $500, this can be given once every five years.

3.   An Award for an employment related accomplishment.  These are allowed when:

  • It has clearly defined criteria
  • A nomination and evaluation process
  • Limited number of recipients

4.   Employer provided parties or social events where the cost is $100 per person or less.

5.   Meals or other hospitality services at work-related functions such as meetings or training sessions.

6.   Valueless items such as tea/coffee, snacks, t-shirts, hats etc.

There is no limit to the number of gifts an employee can receive in a given year as long as the total value is not more than $500.  Small gifts such as mugs or chocolates etc. are not included in the $500 limit.

If you want to give your employees gifts that are tax deductible for your company, you need to be careful what you give.  Items that can easily be converted into cash such as gift cards or stocks will be considered to be taxable employee benefits as will some performance related awards and bonuses.  Included under this rule are:

  • Gift Cards
  • Rewards that include employer-provided meals or accommodations such as trips
  • Cash or non-cash awards from manufacturers that are given to employers then passed onto employees
  • Points for travel, accommodations or other rewards
  • Gifts given by manufacturers to employees of dealerships

If you want to give Cash Bonuses or near-cash bonuses such as gift cards to your employees, it must be through payroll and must have taxes deducted.

For full list of taxable or non-taxable benefits and allowances visit the link below:
CRA's Benefits and allowances chart

Controlling Your Cash Flow Over the Holiday Season

By Randall Orser | holiday season , Small Business

The holiday season is almost here, and your small business is ramping up to sell more than it has all year.  Your orders are piling up and your staff is working hard to get shipments out to customers. 

At this time of year, many small businesses want to celebrate their achievements with staff and customers by giving bonuses and gifts and holding parties.  However, there might be a problem, where do you find the money to support all of this? You have a good balance of accounts receivable arriving in the New Year, but you need a better cash flow now.  Here are a few tips  to ensure that your cash flow runs smoothly over the holiday season.

  1. Make sure that your bookkeeping is taken care of and accurate.  This will provide an analysis of your profit and loss and cash flow and your current debt position.  Maybe it is time to hire a bookkeeper to keep you on top of these tasks and reduce the headaches?
  2. Develop and implement good collection plans and make sure your staff is trained to collect payments on time while still maintaining a good relationship with your customers.  Offer easy payment options to your customers giving them the ability to pay on-line or over the telephone. Giving a discount for early payment can encourage your customers to pay their bills quicker. 
  3. Take advantage of short-term lending – Waiting for late paying customers to settle their bills, buying new inventory, paying your employees or throwing that holiday celebration can strain your cash flow so you need to find short term funding that allows you to access cash immediately.  You could use your savings, credit cards, or line of credit.  Another option is obtaining short term invoice financing for instant capital until you receive payments.
  4. Delay Payments – work with your suppliers to extend your payment terms. The later you pay them, the more cash you will have on hand.  Another option is to delay your holiday party until the new year when you can still celebrate your achievements and the support of your staff and clients.
  5. Use your previous holiday season experience to gauge how much you are going to sell of a product this year and even when to run a sale.  Use a business analytics program to give you important information about your business to help you to increase profitability.
  6. Ensure that your team is well-equipped and prepared for the busy season ahead.  If you need to improve your customer service and nurture more sales hire a few part-time or temporary staff to help you.

Making these preparations to face the holiday season will help to make your busiest time of the year run a lot smoother and be more profitable.

How and When to File a Record of Employment

By Randall Orser | Payroll , Small Business

A Record of Employment (ROE) must be completed by an employer when a worker suffers a break in insurable earnings (from which EI payments are deducted) for seven consecutive days.  Reasons for the break in earnings can include being laid off, dismissal, illness or when the worker resigns.  The ROE must be submitted to Service Canada for the Employment Insurance (EI) program whether or not the worker intends to apply for EI.

There are also special situations when ROEs must be issued.  These can include a change in pay period, (even though the employees are not experiencing an interruption of earnings) or a change in ownership, unless there has been no actual break in employees’ earnings during the change-over, and the new employer agrees to issue a single ROE that covers both periods of employment should it be required in the future. A more comprehensive list of situations when a ROE must be issued can be found on ROE Guide on the Service Canada website.

There are two ways in which an employer can submit a ROE to Service Canada, each of which has it's own filing deadline.

  1. ROE in Paper Form - Part 1 of this must be given to the employee. Part 2 must be sent to Service Canada within 5 calendar days of the first day of the interruption of earnings.  The employer must retain Part 3 as well as the employee's payroll records for six years after the ROE is issued.
  2. ROE Submitted Electronically - the information is transmitted directly to the Service Canada database where it is used to process EI claims.  In this case the ROE must be issued five calendar days after the biweekly period, five calendar days after the end of a monthly pay period, or fifteen days after the first day of the interruption of earnings.

Should the ROE be incorrect, or it needs to be updated the employer can submit the amended ROE either in a paper copy or electronically.

Employers should refer to Service Canada’s website for more information. 

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Accounting Terms Every Businessperson Should Know

By Randall Orser | Small Business

This glossary of accounting terms will get you up to speed if you’re new to business. A big part of understanding the financial side of your business consists of nothing more than learning the language of accounting. Once you’re familiar with basic terms, you’ll be better prepared to make sense of basic written reports and better able to communicate with others about important financial information.

ACCOUNTING is a general term that refers to the overall process of tracking your business’s income and expenses, and then using these numbers in various calculations and formulas to answer specific questions about the financial and tax status of the business.

BOOKKEEPING refers to the task of recording the amount, date, and source of all business revenues and expenses. Bookkeeping is essentially the starting point of the accounting process. Only with accurate bookkeeping numbers can meaningful accounting be done.

An INVOICE is a written record of a transaction, often submitted to a customer or client when requesting payment. Invoices are sometimes called bills or statements, though the latter term has a separate meaning, as explained below.

A LEDGER is a physical collection of related financial information, such as revenues, expenditures, accounts receivable, and accounts payable. Ledgers used to be kept in books preprinted with lined ledger paper -- which explains why a business’s financial info is often referred to as the “books” -- but are now commonly kept in computer files that can be printed out.

An ACCOUNT is a collection of financial information grouped according to customer or purpose. For example, if you have a regular customer, the collection of information regarding that customer’s purchases, payments, and debts would be called his or her “account.” A written record of an account is called a statement, as explained below.

A STATEMENT is a formal written summary of unpaid, and sometimes paid, invoices. Unlike an invoice, a statement is not generally used as a formal request for payment, but may be more of a reminder to a customer or client that payment is due or that payment has been made.

A RECEIPT is a written record of a transaction. A buyer receives a receipt to show that he paid for an item. The seller keeps a copy of the receipt to show she received payment for the item. Receipts are sometimes called sales slips.

A BALANCE SHEET is a statement listing a business’s assets, liabilities, and net worth, or equity (the difference between the value of the assets and the liabilities).

ACCOUNTS PAYABLE are amounts that your business owes. For example, unpaid utility bills and purchases your business made on credit would be included in your accounts payable.

ACCOUNTS RECEIVABLE are amounts owed to your business that you expect to receive. Accounts receivable include sales your business made on credit.

BAD DEBT is money owed for a business debt that cannot be collected; it can be deducted as an operating expense.

NET INCOME is gross income less expenses; it represents a business’s profit for a given year.

The ACCRUAL METHOD of accounting accounts for income and expenses that are earned or incurred within the 12-month period, which is not necessarily when it is received or paid. (For more information, see Cash vs. Accrual Accounting.)

The CASH METHOD of accounting accounts for income and expenses when actually received or paid. (For more information, see Cash vs. Accrual Accounting.)

DOUBLE-ENTRY ACCOUNTING is a system of accounting that records each business transaction twice (once as a debit and once as a credit).

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