Category Archives for "Small Business"

Charging PST on Online Sales

By Randall Orser | On-line sales , Sales Taxes , Small Business

If you are a business that does online sales have to collect and remit taxes just the same as if you had a bricks and mortar business.  This means that you will need to charge and remit other province's sales taxes and different rules in different provinces can make this process complicated.  

Businesses need to register as a provincial sales tax vendor with each province where they will be doing business. Unfortunately, there is little that can be done get around this additional paperwork and bookkeeping, except for to limit the provinces where you ship goods, for example if businesses only sell products to consumers in their own province or if they only sell non-taxable goods and services.

Provincial sales taxes vary by province. There is also the goods and services tax and some provinces use the harmonized sales tax which combines the GST with their provincial sales tax.   For businesses selling only within their own province or territory they only need to follow the rules for their province, but for those selling to other provinces they must charge taxes according to the rules in those provinces.  

  • In BC if the business specifically targets customers in BC through advertising or similar means that they are targeting customers in that province and they are therefore expected to collect and remit PST.
  • In Manitoba out of province businesses must register as a vendor if they solicit sales, the orders originate, the goods are used or goods are shipped to that province.
  • In Saskatchewan all businesses selling online order to customers there are expected to collect and remit PST.
  • In Quebec out of province businesses must register before selling goods to residents there.
  • In Alberta, Nunavut and the Yukon there is no PST.
  • New Brunswick, Newfoundland and Labrador, the Northwest Territories, Nova Scotia, Prince Edward Island and Ontario charge the HST.
  • BC, Manitoba, Quebec, and Saskatchewan charge the GST and a PST.


From an article by Susan Ward

How to Close your GST Account with the CRA

By Randall Orser | Sales Taxes , Small Business

There could be a few different reasons why the time may have come for you to close your GST account with the CRA.

  • If your total taxable revenue (before expenses) has dropped below $30,000 in the last four consecutive calendar quarters then you can apply to regain your small supplier status and no longer collect and remit GST.  However, you must have been registered for GST for at least one year before they will close your account.
  • If you sell or close your business
  • If you no longer make taxable supplies
  • If you are in receivership, a receiver appointed by the courts may take control of your existing GST account until the closure of the business, and your GST account will also be closed at that time.
  • If you are filing for bankruptcy you will need to send copies of the court issued bankruptcy documents to the tax services office.
  • If you are merging or amalgamating with another business.  In this case the CRA may either issue a new business number or allow the reuse of the existing business number.
  • If the business is a sole proprietorship and the owner dies, the heirs or agents will be required to close the account and file a final return.
  • If the business is a partnership and one partner leaves or dies.  Depending on the circumstances the existing number may be reused or a new one might be required.

To close your account you need to complete form RC145 Request to Close Business Number Accounts and send it to your tax services office.  You must also make sure that you file any outstanding GST returns for the period up to the date the account is closed and pay any remittances due.  If you are closing the business you are assumed to be disposing of the assets of the business and that you have collected GST on these sales.  You will need to determine the fair market value of these assets and report this on the return.

If you do not close the account the CRA will assume that you are still in business and will expect you to file returns.  If your business is closed or inactive you can file nil returns until your business starts up again, but if you continue to file nil returns for several years the CRA may contact you to ask if you want to close the account.  If you stop filing returns and don't close the account the CRA will require you to file for the missing dates and if you do not respond you can expect to receive a phone call or visit from from a CRA officer.  If your business is still open and you are not filing returns you will be prosecuted under the Excise Tax Act and you will be liable for penalties and interest.

From an article by Susan Ward

What are Input Tax Credits?

By Randall Orser | Business , Sales Taxes , Small Business

Input Tax Credits or (ITC's) are the sum of the GST/HST you paid on legitimate business expenses or the allowable portion of the GST/HST paid.  The CRA refers to these as Input Tax Credits and they used by businesses to recover the GST/HST paid on purchases and expenses related to operating their business.

To use ITC's you must be registered for the GST/HST and then each time you incur an expense or make a purchase related to your business you need to keep your receipt and keep track of these payments in your bookkeeping system.  It is very important that you keep your receipts so that you can prove your claim in case of a CRA audit.

Some of the expenses that you can claim ITC's per the CRA website include: rent, equipment rentals, advertising related expenses such as business cards, flyers and ads, accounting and other professional fees, home office and motor vehicle expenses, office expenses such as stationery, postage, computer and a certain amount of travel including airfare, car rental and hotel rooms.  You can also claim ITC's on Capital expenses including: capital property, machinery and vehicles, furniture and appliances, and improvements to capital property.  See the CRA website for a full list.

According to the CRA you can only claim Input Tax Credits for anything related to your business and the the purchase or expense must be reasonable in quality, nature and cost.  Some of the things that you can't claim for include: some capital property, membership fees or dues to a club which include dining, recreation or sporting facilities (including golf clubs, and fitness clubs) unless you acquire the membership to resell in the course of your business, and taxable goods and services bought or imported to provide exempt (zero rated) goods and services.

From an article by Susan Ward

Is it Time for the Annual Clean-up and Back-up of your Files?

By Randall Orser | Business Income Taxes , Cloud-computing , Small Business

The end of the year is a good time to put some time and attention into cleaning up and backing up your files. Cleaning up your files lets you clear up physical, digital and psychological space so everyone can get more done. Backing up is essential in case something goes wrong.

Here's how to do your annual file clean-up and backup.

Delete Clutter from Project Management

If you still have old projects open in your project management software, delete them or archive them now. People on your project management software should only be seeing projects that are actually relevant to their work right now.

Archive Physical Files

If you have a lot of physical files lying around that aren't being used anymore, archive them. Small businesses can open a small storage facility to store their archived files. Larger businesses can open an account with a file archive facility.

What to Back Up

At least once a year, you should back up:

§ An entire copy of your website. You should have the "front" end of your website, including the CSS and HTML code, as well as the "back" end infrastructure (e.g. server code) all backed up somewhere.

§ Your entire database should be backed up as well.

§ Your email list and newsletter list should be backed up, along with any mailing sequences.

§ Your customer list should also be backed up.

§ Your forums or any other communication channels should be fully backed up. You should be able to restore your community if anything happened.

Basically, anything that could critically cripple your business if it disappeared should be backed up regularly.

At Least Three Backup Sources

You should have at least three backups of all your most important data. Each offers a different level of protection.

§ Online backup - Online backups work well for small files and for files stored on personal computers.

§ On site backups - These can be done as frequently as once a month. Simply take all your digital data and dump them on a hard drive, then store that drive.

§ Off-site backups - On site backups can't protect your data against earthquakes, fires, floods and other disasters that could affect the physical devices your data is stored on. Off-site backups will hold your data for you, so you're protected in case of a disaster.

Just one level of protection isn't enough to protect you against a catastrophe. Higher levels of protection require more work and are generally performed less frequently.

Change Dropbox Passwords

At least once a year, ask all your employees to change their Dropbox, Google Drive and other backup passwords. Passwords now need to be more complex, and best are ones that are 16 or more characters.

If you perform these tasks regularly, you'll be well protected against disasters in all forms.

How to Minimize Taxes on Your Small Business

By Randall Orser | Freelancing , Home Based Business , Personal Income Tax , Small Business

If you own an unincorporated small business then the you must prepare an income statement each year showing all the income and expenses of the business and the resulting net profit or loss is then transferred to your tax return and taxed along with your income from all other sources.  

As a small business owner,  you are entitled to deduct the ongoing costs of doing business, as long as the expenses are reasonable and your motive for being in business is to make a profit.  You must have a good record keeping system such as Quickbooks Essentials  otherwise there is a good chance that you will forget about expenses that you have incurred and lose some receipts for expenses that you could claim.   Some of the most common deductible expenses include advertising, promotions, rent, salaries, legal and accounting fees and auto expenses.

Deductions Available to your Small Business

  • Advertising including flyers, brochures and other promotional activities.  You can deduct 50% of the cost of entertainment and business lunches as long as they are used to promote your business to current or prospective clients.
  • Office Rent is deductible, however if you own your business premises or work out of your home you cannot deduct the rental value of these premises.  However you can deduct any related expenses such as mortgage interest, property taxes and insurance.  If part of the premises is used for personal purposes then these expenses must be pro-rated.
  • Salaries and Wages are deductible in full as are the employer paid premiums for the Canada Pension Plan, Employment Insurance, Worker's Compensation as well as sickness, accident, disability or income insurance plans. If your spouse or child works for you their wages are also fully deductible as long as the payments are reasonable and the same as you would pay someone else to do the same work.  As the owner,  your wages are not deductible and should not be included on your income statement.
  • Fees for Outside Professional Services such as bookkeeping, accounting, consulting and tax preparation are deductible.  Legal fees are also deductible as long as they are not incurred to buy capital property, instead they have to be added to the capital cost of the property.
  • Business Taxes annual business licenses are deductible.  Fines and penalties for infractions of public laws are generally not deductible.
  • Automobile Expenses related to earning business income are tax deductible.  If you use your vehicle only partly for business then the expenses must be pro-rated between business and personal use based on the amount of kilometres driven for each.  Expenses include gas, oil, repairs, insurance and maintenance.  For more information log into the CRA website.
  • Capital Expenditures which are expenses relating to the acquisition or improvement of a property used by the business may not be deducted in the year acquired.  Tax law requires that their entire costs be claimed slowly over a period of years through a mechanism called capital cost allowances which allows a certain percentage of the costs to be claimed each year.   The rules of capital cost allowances are quite complicated so it is a good idea to hire a professional accountant or bookkeeper to make sure that you are claiming correctly.  For more information see the CRA website Capital Cost Allowances.  

When your business enjoys a profit you must share part of that with the CRA in the form of income tax.  However when your business shows a loss then the CRA shares in that loss as you are usually allowed to deduct the loss against other income thereby lowering the taxes you would normally pay.  However, you must meet the CRA "reasonable expectation of profit test" as the CRA will only share your loss if there is a reasonable expectation of profit in future years, otherwise your losses will be disallowed as simple personal losses.   

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.

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


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.

Five to Ten a Day for Better Health (of Your Business)

By Randall Orser | Home Based Business , Small Business

We have been inundated with advice to eat well for our health’s sake. But, what about five to ten tips to better health of our business? Shouldn’t that be as important to the business owner?  Five to ten tips to follow a day can reduce the risk of failure and ensure your business enjoys a long and healthy life!

Five Tips to Overall Health:

  1. Prioritize and get things done:  When prioritizing, keep customers forefront (and suppliers, inventory, and staff). Without customers, where would you be? Complete tasks. Follow through. Finish paperwork.
  2. Plan ahead (but be flexible) – Get Organized:  Keep your eye on the road ahead. Ensure that you (and your staff) focus on the business plan, the marketing plan, and your original vision. Ensure that marketing campaigns are done ahead of time (ideally, a year in advance). Budgets and buying plans should be completed six months ahead, as well as any open-to-buy for product for promotional sales. Staff schedules and training should be well organized in order to coincide with seasonal upswings.
  3. Customers and Customer Service – It’s always about the customers:  Every business owner should prioritize any task that involves customer satisfaction. If you tell a customer that the product will arrive by the end of the week, then ensure that your promise is kept. If you tell a customer that you will call them, then ensure that you do. Broken promises do not impress customers. Always under-promise and over-deliver!
  4. Nurture all relationships including staff and suppliers:  Reward your staff, motivate your staff and keep them in the loop. Join professional associations.   Expand your communication channels. Get into the habit of mailing thank you notes to customers, staff, suppliers and those who have benefited your business. Pick up the telephone and have a one on one conversation. Stay in touch.
  5. Core competencies – What do you do best?  To thrive in the marketplace, a business must excel in at least one of the following: product offering, customer service, promotional strategies (branding), price or location.  Reminders to not only keep doing what you do best, but initiatives to keep improving. Never lose sight of what distinguishes your business from the rest. Learn to identify your strengths and build on them.

Five More Tips to Overall Health:

  1. Look after the details – it’s always about the small details:  Is the exterior fresh and clean? Does a brightly painted door welcome your customers? Is there a bench, an attractive door wreath, or an eye-catching window display that attracts new customers? Do you have an area for weary customers? Does your children’s store have a toy area for children? Do you supply customers with coupons if you have inconvenienced them? Do you greet your customers by name? Do you capture their names on your mailing list?
  2. Look after the expenses – Pay your bills on time: Send out invoices and request payment in a timely fashion. Eliminate unnecessary perks; eliminate waste; eliminate frills that are not important to the customer. Look for less expensive ways to do everything. If not sure where to begin…call your accountant. Better yet, read your expense sheet and cut costs by ten percent. Pay your bills on time. If possible, pay within ten days and get a two percent reduction for early payment.
  3. Grow (innovate):  Successful entrepreneurs are never satisfied with the status quo. They understand that to increase their share in the marketplace the business must grow: better product; newer technology; more effective website; more informed and knowledgeable staff; timelier shipping: better distribution channels; and so on.
  4. Constantly change – re-invent yourself:  A healthy business realizes that change is a constant; change will keep customers coming back. Customers will return to see new product displays, new demonstrations, and new content. Customers will brand your business – as a leader. Keep your customers delighted, inspired and motivated.
  5. Old-fashioned principles are still true:  Keep your business honest, reliable and trustworthy. Stand behind your policies – with no exceptions. Advocate privacy and honesty on your website and in print. Ensure that all practices value those principles. When a business values old-fashioned principles, customers will learn to trust that business and sales will follow. (There are some values that never grow old.)

You will know that your business is strong and healthy when you have difficulty prioritizing the above tips. Is change more important than principles? Are relationships more important than the bottom line?   A business owner that puts the customer (and customer service) to the forefront understands that the suppliers, the product, the service and the staff make up the equation.

The most successful businesses thrive because their owners understand that all aspects of business must be healthy; one area cannot stagnate or be left unattended for the sake of another area. Because a successful business is a component of all best practices – each integrated to make the whole.

A healthy business will enjoy a long life…so integrate five to ten a day to increase your chances to survive. The life of your business might depend on it.

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