Category Archives for "Small Business"

Make Tax Time Less Stressful with These Seven Tips 

By Randall Orser | Business Income Taxes , Small Business

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

1. Keep your business and personal expenses separate.

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

2. Get sufficient documentation for all business expenses.

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

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

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

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

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

5. Keep a mileage log of your business travel.

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

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

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

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

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

What Your Tax Accountant Needs to Prepare Your Income Tax

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

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

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

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

Business Records Your Accountant Needs

· Revenue and business expenses for the year

· Business use of auto

· Auto operating expenses

· Vehicle driving log with business kilometres driven

· Asset additions

· Business use-of-home details

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

· Last year’s Notice of Assessment

· Amounts paid by installments

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

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

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

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

· T4A commissions & self-employed

· T5013 Partnership Income

· T3 Income from Trusts

· T5 Investment Income

· RRSP contribution slips

· Charitable donations

· Medical and dental receipts

· Child care information

Save Money on Your Tax Accountant’s Fee

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

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

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

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

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

New Year’s Resolutions for Your Small Business

By Randall Orser | Employees , marketing strategy , Small Business

When we think about making New Year’s Resolutions, we usually think about trying to improve our personal lives in ways such as losing weight, stopping smoking, exercising more etc.  However, you can also create resolutions for your small business to do things differently and try to bring about positive change. Here are some suggestions for resolutions that you could make to improve your small business in 2020.  

I Will Learn to Manage my Cash Flow More Effectively – If you do not really understand the finances of your business it might be time to hire a professional bookkeeper to help you.  You need to be better prepared for the ebbs and flows in your cash flow and be able to create enough capital to put back into your business. You may also need to change your methods of payment. Allowing your customers to pay by e-transfer or credit card instead of cheque may mean that you are paid quicker thereby improving your cash flow. 

I Will Improve my Digital Presence – If you have not updated your website in more than two years then it is time to make changes.  You need to make sure that your site is mobile friendly and make sure that all your product details are up to date, delete discontinued items and make sure prices are correct.  If you haven’t already you need to create an email marketing list to send out newsletters with helpful information or offers.  If you are not even using digital marketing, then you need to make this a priority resolution for the new year.

I Will Finally Get Social – If you do not have a social media presence then you need to remedy this right away.  Consider which network is the best platform to your business and post to it regularly.  Think about starting a business blog with content important and relevant to your business.

I Will Get Focused and More Productive – If you waste time on social media or other distractions when you should be focusing on the tasks that you need to do for your business then you need to change your work focus immediately. Rather than letting the day pass you by, get on with  completing those important things that you need to do.  

I Will Charge What I am Worth – If you are feeling underpaid and undervalued for your work then make a resolution to market yourself to the right audience and make sure that you are charging the industry norm for your work.  Revamp your strategy and raise your rates to reflect your value to your clients.

I Will Grow my Team and Delegate More – If you have more work than you are able to handle then you need to make a resolution to bring people to your team who can take over some of the work that you do.  Think about hiring a bookkeeper and a social media consultant who can take over this time-consuming part of your business.  If  you have employees, you need to learn how to effectively delegate to them tasks that you are currently doing to free up your time to build your business.

I Will Become a Better Communicator – If you are constantly having misunderstandings with your employees, wasting time repeating yourself over and over, and there is a lack of employee morale in your company one reason may be that you are communicating ineffectively.  Take time to learn how to be better communicator it is very important to get your employees on board with building a successful business.

After you have made your resolutions you need to create a plan to put them into action.  Once you have that information then it is time to turn your resolutions into your business goals for 2020.

Tips for Retailers – How to Increase Your Sales the Week After Christmas

By Randall Orser | Employees , holiday season , Marketing , marketing strategy , Retail , Small Business

The week between Christmas and New Year can be a great opportunity to increase the profitability of your business.  If you do it right, you can net more from this week than any other week in the year.  Here are some tips to help you to have a profitable week.

Creating a Customer Experience – More than likely you will have customers in your store to spend those gift cards that they got for Christmas.  Many will be regulars but many of them will be visiting your store for the first time and you need to WOW them so that they will come back.  Think of little extras that you can offer to enhance their experience.  

Christmas is over, so freshen up your store.  Take down Christmas decorations and promotional signage and change the music.  For those customers who came in before Christmas a change of atmosphere may energize them to buy.

Sales and Incentives – Have your markdowns ready for the 26th of December.  The faster that you move this merchandise the sooner you can freshen up your store.  Some retailers believe in having a January sale instead, but this means that you will not be ordering new stock until February and your store will not have a new look until March.  Stuff bags with coupons to give customers incentives to return.

Full Price Merchandising -  Part of freshening up the store is putting new full priced merchandise out on the floor.  As many people are using gift cards, they might be more likely to buy new full priced items rather than those left over from the holiday season, giving you a greater profit margin.

Reduce your spending on Advertising – As it is after Christmas everyone is having sales. So instead of spending money on advertising use that money to motivate your staff to give exceptional customer service or use it on incentives for your customers.

Refocusing Staff -  The focus has changed from selling stuff, to keeping it sold.  Instead of having staff just concentrate on returns encourage them to focus on converting returns into exchanges and new sales.  Train them on suggestive selling techniques to use when they are processing a return. If you sell a lot of gift cards before Christmas ready your staff to sell prospective new customers.  This is also a good time to update your customer data base and to encourage customers to join your loyalty program.

Show Appreciation to Your Staff – They have just gone through the most hectic four weeks of the year and you are now asking them to do more.  This is a good time to show them that you care, coffee runs, catered lunches or even the services of a masseuse are ways to show your appreciation for their efforts. 

Remember most customers are just coasting until New Year and they don’t expect to find much in stores except sales on leftover Christmas items.  If you have made your target it can be tempting to sit back as well, but this is a great opportunity to create a good impression with customers by giving them new and interesting things to buy. 

When Should the Holiday Shopping Season Start?

By Randall Orser | Budget , Employees , holiday season , marketing strategy , Retail , Small Business

There is no specific date when retailers should start their Christmas Holiday selling season, but customers would argue that it starts earlier every year.  Following consumer push back the Christmas retail season usually starts after Remembrance Day here in Canada, that’s unless you shop at Costco!  

Retailers who start their Christmas selling program too early, both in-store and on-line often find that customers are irritated by being bombarded with Christmas advertising, merchandise and songs in November and they are turned off of holiday shopping.  Hiring staff too early can be costly for a retailer, if there are not enough sales to support the extra staff and putting out Christmas inventory too early can be a waste of valuable retail space if it is not selling. 

When it comes to Holiday Season discounts and sales which are appearing earlier and earlier each year it is important to put a lot of thought into the products or services that you want to discount.  It really depends upon your business and your market, but these considerations apply to most retailers.

  • If the items are appropriate for the time of year, you don’t want to be selling summer season items in winter.
  • If the items are appropriate for your location – there is no point in trying to sell mitts and scarves in somewhere like Florida or Southern California, they need to be sold in colder climates.
  • Timing – whether your customers will have money to buy early in the season or they are most likely to spend when they get their Christmas bonuses.  You could consider a layaway plan for larger ticket items so they can be paid for over a number of weeks.
  • What you want to have in stock for after Christmas sales when people have more time to shop and likely have more cash and gift cards to spend.
  • Following what other retailers in your industry do if it is a good decision for your business.  It is always a good idea to know what your competition is doing but don’t start your holiday sales earlier because they do if it does not make business sense for you.

Starting your Holiday discounting too early although beneficial to some customers to others it is confusing.  Two months of constant big sales makes it difficult for them to know when to buy to get the best deal, it can also sap any sense of urgency and deter them from making major purchases on Black Friday and Cyber Monday.

Could you be Defined by the CRA as a Personal Services Corporation?

By Randall Orser | Business Income Taxes , Consulting , Employees , Small Business

With the loss of full-time positions, people are forming one-person small businesses and then incorporating for tax advantages and liability protection.   

You do not want the CRA to define your corporation as a personal services corporation because you will not be allowed to claim any of the standard business expenses including the Small Business Deduction. The CRA explains this as a person providing services on behalf of the corporation is called an incorporated employee not a contractor.

This makes a big difference to your income tax if you are defined as an employee rather than as a business person, because you will not have the same potential tax deductions as a business person. 

The CRA defines a personal services corporation as: "a business that a corporation carries on, to provide services to another entity (such as a person or a partnership) that an officer or employee of that entity would usually perform" (T4012 – T2 Corporation Income Tax Guide, Chapter 4, Canada Revenue Agency.

The CRA uses four criteria to determine whether a person is an employee or an independent contractor:

  • Control 
  • Ownership of Tools
  • Chance of profit/risk of loss
  • Integration

For a corporation with only one shareholder doing business for only one company it is hard to prove that they are actually a business and not a personal services corporation.  From the government’s point of view, just calling an employee something else does not mean that they are not actually an employee, especially when their duties are exactly what an employee would do.   

If you are defined by the CRA as a personal services corporation you run the risk of not only losing your small business tax deduction and other standard business deductions, you may also be subject to reassessment.  There is no time limit for reassessment, the CRA can examine your business records and find you owing for years of back taxes. 

To avoid being classes as a personal services corporation you need to ensure that you have at least five full-time employees throughout the year and that you provide services to an associated corporation.  Unfortunately this is not always possible for a small corporation, so you need to find other ways to prove yourself.

  • Avoid working for more than one client especially in a long-term relationship, the more clients you have the better chance you have of avoiding the personal service business designation.
  • Even if you do not need five employees, having any employees helps the CRA to determine your status.
  • Make sure that you continually pay attention to your situation in regard to the CRA rules on whether you are an employee or an independent contractor, these are: 
    • How much control you have over the work that you are doing for your client.
    • Ownership of tools
    • The chance of profit or risk of loss that you are exposed to.
    • The degree that you are integrated into your client’s business.
    • Avoiding the perception that you are an employee of a client, by having a written contract with them detailing the services that you will be providing and invoicing your client monthly or by the project.  If your client just pays you without receiving an invoice from you this is a red flag.

If you work as a contractor make sure that you are fully aware of CRA regulations and their distinction between employees and independent contractors.  

From Articles by Susan Ward

What is Inventory and why is it Important to your Business?

By Randall Orser | Business Income Taxes , Small Business

Your company’s inventory is what you sell to your customers.  It can either be purchased from a wholesaler and sold on-line or in your store, or it can be the raw materials that you use to manufacture products to sell.  It can also be component parts that you put together to make a product to sell. 

Inventory has value so it is an asset to your business and once you sell it you will be making money.  It also has value as collateral if you need a business loan.   The cost of selling your inventory (called cost of goods sold) is important for your business as it includes the cost of the items to make your product as well as the costs for storing inventory in your warehouse, shipping products to your customers and hiring people to work in the warehouse. 


Keeping Track of your Inventory – in both your accounting system and its physical location is important for your business:

  • To know how many items are in your inventory and their value as an asset on your balance sheet.
  • To know the costs associated with buying and selling inventory which are deductible business expenses that can reduce your business taxes.
  • Inventory costs and gross profit from sales are a major part of your business tax return.
  • The value of your inventory can be used as collateral for a loan.

Different Types of Inventory -  inventory can be divided into two categories:

  • Supplies – items sitting on the shelf waiting to be used.  These include office supplies, cleaning supplies, computer supplies and accessories.
  • Product inventory – this can be either items you buy wholesale to sell to customers or items manufactured and ready to sell, as well as components and raw materials.

Inventory and Cost of Goods Sold – Inventory is essential in calculating the cost of goods sold, which in turn is used to determine gross profit for a business that sells products whether it is a sole proprietorship, partnership or a corporation.  The cost of goods sold is calculated by:

  • Beginning inventory (your inventory at the beginning of the year, or the beginning of your business.
  • Add net purchases (calculated after discounts, allowances and returns).
  • This equals the Cost of Goods Available for Sale.
  • Less ending inventory, which is the value of your inventory at year end.

The closing inventory at the end of one year becomes the opening inventory at the beginning of the new year.  Businesses take physical inventory to make sure that what they have on record is correct.  At the same time, they can check for spoilage of obsolete goods and theft or bad record keeping which costs the business money.

From an article by Jean Murray

What is the Difference Between Office Supplies and Office Expenses on Your Business Taxes

By Randall Orser | Small Business

It is important to know the difference between Office Supplies and Office Expenses for your business because these costs are handled differently on your tax return for Canada Revenue.  The CRA allows any reasonable business expense in that the expense must be appropriate to your business and used in an attempt to make money. 

Office Supplies – are traditional office items such as pens, staplers, paper clips and printer ink cartridges that aid in the operation of your business.  Also included in office supplies are:

  • Invoices and receipts used for record keeping purposes
  • Cleaning and janitorial supplies including toilet paper
  • The cabinets and storage lockers where your supplies are kept
  • Kitchen supplies such as plates, utensils and paper towels
  • Beverages such as water and coffee
  • Postage


It is very important that you keep all your receipts pertaining to office supply purchases to prove to the CRA that that you did in fact purchase the supplies.

Office Expenses – are the other expenses of running an office, they are used for the operations of the office and are sometimes called office operating expenses.  They include:

  • Website and cloud services such as iCloud
  • Internet hosting fees and website maintenance, domain names, monthly costs for apps
  • Software including web-based software such as QuickBooks and Adobe
  • Merchant account fees 
  • Desktop computers, laptops, ipads and tablets
  • Office phones, smartphones and most software and hardware.  Cellphone expenses can also be included in office expenses
  • More expensive office expenses may become business equipment and are categorized as assets and are depreciated over time. This would include computers, furniture, fixtures, office machines and other electronic devices.  

For more information on office expenses visit the Canada Revenue website at:  

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/business-expenses.html

Ideas for a Halloween Business

By Randall Orser | holiday season , Home Based Business , Small Business

If you are thinking of starting a seasonal business, statistics have shown that Halloween is a good time to do it.  Don’t bother thinking about trying to get into business selling candies or pumpkins, that Halloween business is already taken by bigger companies like Walmart so it would be pretty much impossible to compete. 

However, you there is scope with Halloween costumes and decorations to develop a business and cater to a niche market.  For example:

  • Providing Halloween music for parties
  • Creating “authentic” period costumes for adults
  • Providing Halloween decorating services for homes or businesses
  • Presenting in-house parties for children (a substitute for trick or treating.) or organizing adult Halloween events.

Also growing in popularity is visiting haunted houses.   Setting up your own could be expensive and turn out not to be as good as other ones nearby but providing tours of “haunted houses” and other spooky sites in your area could be a lucrative business.  Contact your local historical society to research the paranormal history of your area and you could uncover ghost stories that might surprise you and present them to your customers in an entertaining and exciting way. 

If you set up a decorating or party planning business for Halloween, it would not be difficult to turn this into a seasonal business for Christmas or even do the same for birthdays.  Once you are established and do a good job you might be surprised at how many clients you get and how much profit you can make.  

The Top Mistakes New Freelancers Make

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

Once you have made the decision to leave the rat race and set yourself up as a freelancer, there are some things that you must consider before you begin, if you want to be successful. Although there is nothing wrong with giving it up and going back to your office cubicle and 9-5 routine, if you make these mistakes then you might be going back sooner than you think.

  1. Not Having Enough in Your Savings Account  - Experts say that you should have between three and six months of expenses saved as well as your start-up costs.  This can seem like a lot of money.  There are ways that you can raise money, but two things you should not do is withdraw from your RRSP or put everything on your credit card.  If money is tight you should start freelancing while keeping your full-time job.
  2. Not Defining your Goals – Once you decide to go out on your own you need to set your goals.  The first one is to decide what you want to get out of going freelance.  Is it about having a flexible schedule, and the ability to decide on the clients that you want to work with?  Is it about just making enough money to pay your bills or do you want to make more than you did as an employee? Once you set your goals you need to check them at regular intervals to make sure you are achieving them or to revise them.  
  3. Not Having a Business Plan- You need a business plan to use as a guideline for your future.  Your plan needs to include basic information about your business such as the contact information, what you do and what you are hoping to achieve. In the future. You need to describe the products or services you are offering including pricing. Information as how you will market your business is important as is an estimate of your operating expenses and what you will need for future growth.
  4. Jumping in too Soon – It is a good idea to start your freelancing career while still working full time.  You will be able to try out a different jobs and clients and see who you are happiest working with.  It enables you to make mistakes and still have an income and also to build your savings so that you are ready when the time comes to jump.  It also allows you the time to set up your office to suit yourself and have the equipment that you will need to do the work.
  5. Not Having a Contract – Having a verbal contract can be enough but a written one is usually better.  A contract will not always help you to get paid, but it will define expectations on both sides and make sure that there are no surprises when the job is finished.
  6. Not Having a System to Organize your Paperwork and Money– You don’t always need to hire a bookkeeper or accountant, but as your business grows this might be a good idea.  You can use an app such as Quickbooks to make tracking your income, expenses and taxes much easier.
  7. Taking on the Wrong Clients – Good clients are those who give you regular jobs that you can and want to do, and work with you to get the best results.  They are also easy to communicate with and pay your invoices on time. Inevitably you will end up with a client who does not meet those criteria and you spend more time than you should on them for less money.  You need to be able to decide when you have had enough and that they are no longer worth it, as well as how to recognize the signs to avoid this type of client in the future.
  8. Not Setting Realistic Rates for your Work  – There is no fixed formula for setting rates for your freelancing work.  Prices depend on the industry, geographic area, your skillset and expertise and the work you are doing.  You need to decide if you are going to bill hourly or by the project, which can change with each job.  You also need to decide what is your rock bottom dollar amount and keep this in mind when charging clients.  You may start out at a lower price as you are building your clientele and experience, but you must know how low is too low so that you don’t take jobs that don’t pay enough leaving you financially overextended and stressed.  As you gain more experience you should look at your rates and revise them if necessary. 
  9. Not Having the Required Self Discipline– You might start freelancing assuming that the best thing about it will be the flexibility of your work hours.  In reality, you will need to available for your clients during regular office hours which can be difficult if you prefer to sleep late.  Even though clients cannot demand that you are available specific hours they still need you to be available to answer their questions or they will move on to someone more accommodating.  On the other hand, you need to establish what hours you will be available to your clients, such as 8am to 6pm.  Make it clear that unless you say so, calls from them at 10pm or on weekends and holidays will not be welcome. 

Starting out as a freelancer can be difficult but you should not get discouraged if you make a mistake.  You will soon discover whether working freelance is a fit for you. 

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