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Debt-Crushing Habits for Small Business

Debt is such a normal state of finances that the idea of it isn’t as scary as it was a generation ago because everyone’s dealing with the same things; lease for office and manufacturing space, vehicle payments, and the business loan that helped get you off the ground.

The truth is that debt is scary, and a serious player in the success or failure of your business. Without a plan to pay your debt not just down but off you can’t get ahead. Work these debt-crushing habits into your business plan now and make a business plan to thrive rather than merely to survive.

Set a budget, stick to it, and practice tidy bookkeeping.

Budgets require so much care they’re practically living beings. You have to make adjustments based on your expenses, your income, rising prices for equipment and wages, and interest on your loans. It’s smart to set up a budget at the start of every fiscal year, and it’s wise to review it at least every quarter. Know where your money goes by tracking every single expense. Look hard at where you’re failing to stick to your budget and find out why. Don’t fix the failure by assigning a higher expenditure to the failing part of the budget unless you can cut back somewhere else or dramatically increase your income.

Pay down debt.

You’ve already got debt, that’s business. Pay it off! Pay it off at a higher rate than the minimum or else you’ll never get anywhere. You have additional bills to pay, you want to grow your business, and you want to earn a living. Hold off on incurring more debt before paying off what you already owe. You’ve got the saying, “You have to spend money to make money,” ringing in your ears, but that’s a general idea, not words to live by. Take calculated risks rather than hoping for the best. Look at your tidy books and forecast your projected income to see whether it’s worthwhile to invest in another machine or hire another employee this year or if next year is the smarter option.

Make more money.

If your income isn’t enough to cover your debt and then some, find ways to increase your business or upscale your services. Create more appealing packages, consider partnerships, find out what the needs of your clients are and fill them. Increase your rates. If you can’t make more money, scale back your expenses. Find smaller office space, use only 1 vehicle, and sell seldom-used equipment that you can rent when needed.

Save Money!

In addition to your accrued debt, you’re going to owe taxes and your accountant. You may want to give your employees a year-end bonus. You should be prepared for an emergency. Save at least 10% of your income to cover expected and unexpected expenses. How do you do that? Pay your savings account first. It’s a popular suggestion of financial consultants everywhere because it works. Make saving money a priority in your bookkeeping rather than an “if” and see if you don’t sleep better at night.

Feeling overwhelmed or uncertain about your debt? Want to know what reasonable debt is and how to tell your accounts are out of control? Book a consultation with Upside Accounting for sound advice from one small business to another. Call (226) 214-3233 from anywhere in Canada to set up an in-person, phone, or virtual appointment.

Debt Free Party!
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Bookkeeping, what is it good for?

To those who miss the rich nuances in the art of bookkeeping, this chore is simply keeping track of invoices and bills in order to pay the staff and your taxes. And that’s good enough, which is perplexing to us accounting geeks because in our experience “good enough” isn’t good enough for entrepreneurs. You started your business from an idea and worked hard to build what you have now. Keep that momentum going by harnessing the powers of quality bookkeeping and turn “good enough” into dollars and sense.

Bookkeeping

Bookkeeping entails intimately tracking your income and expenses in a book called a ledger – by now we sincerely hope you’ve discovered the sanity-saving software versions. You bought an online advertising package? That goes in the ledger. You paid your employee? That goes in the ledger. Even unpaid invoices are included.

It’s the details of bookkeeping that trip most people up. The idea of noting your latest gas receipts and weekly mileage regularly sounds easy, but it’s even easier to say, “I’ll do that next week.” Say that a few times, and suddenly your fiscal year end is upon you, and you’ve got mountains of debits and credits to enter. Now your bookkeeping is a nightmare! *cue horror movie soundtrack* It doesn’t have to be like that. Take 5 to 10 minutes and balance your latest bank statement or hire a bookkeeper to come in once a month and do it for you. If it’s not obvious that investing time and maybe a bookkeeper’s wage is going to make you money, look closely at the data.

Up-to-date bookkeeping is a map of your business that provides clear navigation to success. When you can easily review the details of where you’ve been, you can plan where you’re going with accuracy to relieve stress and get excited about the future. Updated bookkeeping allows for:

Tax Planning

Know how much you’ll owe in taxes, and plan for it – we know, that one’s easy. Good bookkeeping also means you can look ahead at current and upcoming tax credits that you or your business qualify for and make plans for eligibility, like hiring and apprenticeship credits. And make sure you’re updated on the current fiscal year’s expense allowances administered by the CRA before you blow the budget wooing a new client.

Forecasting

Forecasting is an incredibly satisfying perk of bookkeeping. Use your historic financial and business information to project your upcoming year. Know when your busy season is and be prepared to hire additional staff. Know when your quiet season is and be prepared to lay staff off. Examine your upcoming projects and find out whether any of them qualify for government funding. Look at your growth to devise an expansion strategy.

Realistic Budgeting

Budgeting and Forecasting are best friends. Use your financial forecast to set a budget – a realistic budget based your own historical data. Know when it’s critical to save extra funds in order to support slow times. Use your budget to measure your real-time financial situation as the year goes on and make adjustments based on what has already happened and what your business’ history suggests will happen so that you aren’t left scrambling to pay bills or fulfill orders.

Upside Accounting can help you develop excellent bookkeeping skills and plan for the future. Never done this before? That’s okay! We’re here to help. Book a consultation today by calling (226) 214-3233.

Bookkeeping

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To Buy or Not To Buy?

As your fiscal year-end nears – and for a lot of our clients that momentous date is December 31st – you should be thinking about your bookkeeping and taxes. This can be especially tricky when your fiscal year-end aligns with the calendar year-end. It’s tricky because you also have to balance the holidays, vacation schedules, and your increased orders if your customers rely on you at gift-giving time. Pre-planning for your fiscal year-end could provide you with huge savings immediately at tax time. Thus, persevere to take a look at your books. In particular, consider what depreciable property you could purchase now that will allow you to benefit from capital cost allowance (CCA) ASAP?

Assets, Defined

Allow us to explain. When you hear the word “depreciable property” or “assets” it’s not unusual to immediately think about big machinery. Whereas, us accountants and business counselors want you to think of assets as any kind of machinery, equipment, furniture, fixtures, or other need-or-nice-to-have items that cost upwards of $500 with a life expectancy greater than 1 year. Think machinery, but not just of the assembly line variety; include equipment you use for packaging, mailing and administration. Think about laptops, desktops, tablets, cell phones, scales, mixers, labeling machines, cars, desks, exterior signs, trade show displays, buildings, and commercial property. Your coffee machine might even qualify if you’re fancy like that.  

When to Buy

The burning question that keeps a depreciable asset on your year-end shopping list is whether to buy now or next year. There are pros and cons to both. Although, we tend to advise you towards now because you’ll receive a tax deduction sooner rather than later. While you get to spread the deduction out over multiple years (yay!), that first year is always considered a half-year (rats!). This is because the CRA figures you didn’t benefit from your new toy for that whole year. No matter what part of your fiscal year you purchase an asset in, you only get half of the deductible in Year 1. This is why it’s hugely beneficial to make that purchase at the close of your fiscal year rather than the start.

An Example

Let’s pretend you’re buying a laptop:

Let’s say the laptop is purchased for $749.99 before tax. You receive a 55% deductible for computer hardware.

Year 1 deductible comes to $206.25, which makes the book value of the laptop in Year 2 $543.74.

Year 2 deductible comes to $299.06 which makes the book value of the laptop in Year 3 $244.68.

In the first 2 years, you have that laptop, you’ll get $505.26 back in tax deductions. Every asset is categorized with different rates, but the general deductible range is 4%-55%. Lower percentages are applied to the highest-priced assets, like buildings, so your deductible is still beneficial.

Bonus tip: You don’t have to claim your CCA every year. If you don’t owe taxes this year, you may not want to claim the CCA and carry it forward for next year. It pays to plan ahead!

There are other ways you can use asset purchases to your benefit, and these may influence your decision to buy now or buy later. Contact Upside Accounting at (226)-214-3233 and find out what else you should be thinking of as your fiscal year winds down.

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What Coworking Spaces Can Really Do For You

We have chatted with numerous people here at UpSide, contemplating the leap to being self-employed.   They are good (I mean VERY good) at their profession but staring into the abyss of the unknown has to be one of the top deciding factors.  “Should I stay or should I go now” is playing in my head currently. The difference maker is support and surroundings. I mean UpSide was even born in a coworking space.  Don’t get me wrong, we have seen people who excel being locked in their basement or spare bedroom and just pound out the work.  Typically coders, website builders, yes even accountants do well in these environments.

At some point, though, EVERY business owner has to come up for air and hunt down more business.  For the majority, this will feel isolating and overwhelming as there is just soooo much to do when success is solely on your shoulders.  This is why it is so important to get out and network, talk to people, ask questions about anything and everything.  Coworking spaces have this component ingrained in their culture.  You would really have to try to not engage in someone, in something every time you walk through the doors.  Like attracts like and the entrepreneurs that I’ve met are some of the most giving people out there.

But don’t take my word for it, click on this link to read an article from Forbes

Check out Cambridge’s “The Idea Room”

Or, we’d love to chat with you if you are considering the leap and not sure where to start!

Coworking space

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Why Should I Care About Sole Proprietorship vs. Incorporation?

When you start your own business in Canada it’s easy to get overwhelmed with paperwork and protocol, especially when you’re a staff of 2 and you’re mopping your own bathroom floor. One of the decisions you’ll have to make ASAP is whether to strike out as a sole proprietor or incorporation. Unfortunately, you don’t even know what that means. We can help you with that!

The terms Sole Proprietorship and Incorporation refer to ownership. The government gives you 4 options to choose from when declaring to the Canada Revenue Agency (CRA) who is responsible for your business. However, as a small business owner you really only have to worry about the first two (the others are Partnership and Co-operative).

Sole Proprietorship

If you are the sole proprietor of your business, then you own it all. If this were Middle-earth you’d be wearing that one ring. You file 1 tax return because your business taxes ARE your personal taxes. You don’t have to sign legal documents to declare yourself (aside from your tax file). There are few formalities and all the power.

Entrepreneurs who choose to go the sole proprietorship route experience unique benefits. These include, zero incorporation fees, an instant start date, and total control. The only people you report to are your clients and the CRA (and the law, of course).

The downside of a sole proprietorship links directly with the benefits. You are entirely responsible for the business. That includes incurred debt and lawsuits that may come your way via creditors or clients. You also may end up paying more in taxes if your revenue puts your income into a higher bracket.

Choosing to run as a sole proprietorship depends on what your business is. If yours is a low-risk, not-pouring-all-my-life-savings-into-launching kind of service, then you might feel comfortable operating solo. Artists, designers, writers, and similar freelancers typically begin as sole proprietors and stay that way until they get burned. Or rather, they earn enough revenue to use incorporation as a taxable advantage.

Incorporation

By incorporating your business you are registering as a company with the Canadian government which opens doors for you both financially and legally. As soon as the ink is dry on the paperwork, your life savings are protected from lawsuits and debt incurred by your company (with a few exceptions). You can also apply for corporate loans and grants. Although your taxes become more complicated, your personal taxes won’t be as…well, taxed.

Incorporation costs between $800 and $2800, which includes paying government fees, as well as the optional fees for the accountants and lawyers to help assist with the filing (like Upside Accounting!). It does not include additional fees you may pay to file your taxes every year, the bookkeeper you may want to hire, etc. Incorporating after you’ve run as a sole proprietor will likely cost you a little more, but can be done.

The decision to choose between sole proprietorship and incorporation lies with you. We have now outlined the basic differences between the two. This is information is meant to inform you on the concepts to help you know you have options and what they consist of. On top of that, now if a buddy at the next BBQ you go to starts talking about it you’ve got a clue!

For more detailed information on sole proprietorship and incorporation and how they apply specifically to you, get in touch by calling Upside Accounting at 226-214-3233 or contact us here.

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Firm of the Future

September 20, 2016–CAMBRIDGE, ONTARIO: UpSide Accounting places runner-up in Intuit Inc.’s Firm of the Future 2016 contest. Firm of the Future winners are selected from an international pool of accounting firms dedicated to dynamically changing the landscape of business bookkeeping from a necessary service to a supporting role in the clients’ success. As a runner-up in the Firm of the Future contest, UpSide Accounting is being lauded as one of the top 20 forward-thinking firms supporting small business on an international stage.

Contest entrants push the boundaries of traditional accounting with cloud-based accounting and value-based billing, enabling the firm to serve progressive small business owners from anywhere. UpSide Accounting also provides support to clients with business development consultations in addition to financial management. Incorporating technological advancement into their regular workday–like apps and social media communication–allows UpSide Accounting to meet with clients on their terms, and speaking the same language. While UpSide Accounting takes the initiative to train clients on cloud-based accounting apps, new clients seek them out because of this specialty. The increased efficiencies provided by cloud accounting allows the partners to engage with clients anytime, on any platform, “We always tell our clients that we won’t charge them for a five-minute phone call because we want them to save money and be confident that they’re doing the right thing,” says Mike Widdis, CPB at Upside Accounting.

Over 95% of UpSide Accounting’s clients use cloud-based accounting software and third-party apps to conduct business. However, Widdis says, the most noticeable difference between forward-thinking firms and traditional isn’t so much the technology as it is the company mindset. Accountants embracing technology are talking to each other and learning together as equals rather than distancing competition. “We have a niche clientele,” says Widdis, referring to their client-base consisting of creative start-ups and solopreneurs, “and we will send clients who don’t fit that to firms better suited to their needs.”

Intuit Inc.’s Firm of the Future contest is open to cloud-based accounting firms using Intuit financial management solutions in Canada, Australia, The United Kingdom, and The United States of America. The top prize is $10,000 USD and the winner is chosen by public voting committee from 4 finalists – one from each eligible country. Fifteen runners-up are selected from the international pool of entrants and are awarded $2500 USD.

ABOUT UPSIDE ACCOUNTING

UpSide Accounting supports startups, entrepreneurs, and solopreneurs with customized financial and business solutions, providing a rich source of support for businesses at every stage. The greatest source of career satisfaction for partners Mike Widdis and Phil McTaggart rests in their open communication platforms which straddle the traditional lines and ever-evolving social media. Embracing cloud-based accounting techniques and third-party app efficiencies puts UpSide Accounting on the leading edge of frustration-free accounting and business management skills to suit every definition of success.

Intuit’s Press Release

UpSide Accounting - Firm of the Future

UpSide Accounting – Firm of the Future

CONTACTS FOR UPSIDE ACCOUNTING

Mike Widdis and Phil McTaggart – (226) 214-3233 – office@upsideaccounting.ca

Website: www.upsideaccounting.ca  Address: 10 Queen St. W, Cambridge, ON  N3C 1G1