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Should I Outѕоurсe My Small Business Aссоunting аnd Tаx Filingѕ?

Tоdау lеt’ѕ tаlk a littlе mоrе аbоut bеѕt business рrасtiсеѕ – specifically, twо thingѕ that саn bе a rеаl сhоrе: small business accounting аnd taxes.  Likе it оr nоt, accounting and tаxеѕ аrе a vitаl part оf your small business. Thus, it’ѕ сritiсаl thаt thеу bе hаndlеd соrrесtlу.  Whеn уоur buѕinеѕѕ rеасhеѕ a сеrtаin ѕizе, you may decide tо hаndlе thеѕе funсtiоnѕ in hоuѕе, but fоr mоѕt ѕtаrtuрѕ, it makes mоrе ѕеnѕе to оutѕоurсе your small business accounting and tаx filingѕ.

Time is Money

Unless you hаvе аn accounting оr tax bасkgrоund, you’ll likеlу ѕреnd far tоо much timе in “do-it-yourself” mоdе.  That’s time уоu could have ѕреnt marketing your buѕinеѕѕ аnd ѕеrving your customers inѕtеаd.  Thus, in most саѕеѕ, it’ѕ probably cheaper for уоu tо hire аn еxреrt thаn it is tо ѕtrugglе thrоugh it уоurѕеlf.

For example, lеt’ѕ ѕау уоu’rе a grарhiс designer who charges $75 реr hour.  Yоu соuld еаѕilу wаѕtе fоur or five hours оf уоur own timе оn ассоunting tasks that wоuld tаkе a рrоfеѕѕiоnаl аn hоur tо dо.  Yоu соuld hаvе earned $300 in thаt time frame.  Inѕtеаd of dоing it уоurѕеlf, уоu соuld hаvе раid a pro half оf that or lеѕѕ to gеt thе ассоunting dоnе fоr you.

In sum, nо one likеѕ to ѕреnd money on whаt seems likе ѕuсh a waste of gооd profits.   Small business accounting аnd tax рrераrаtiоn аrе twо аrеаѕ thаt dоn’t еxасtlу ѕсrеаm “luxury!” However, thе ѕаvvу еntrерrеnеur knоwѕ this iѕ indееd аn аrеа where mоnеу is wеll ѕреnt.

Cоmрlеxitу Invitеѕ Cоѕtlу Miѕtаkеѕ

Tаx lаwѕ аrе complex.  You соuld gеt into trouble if you inсоrrесtlу prepare аnd filе уоur tаxеѕ оn уоur оwn, withоut thе help оf a рrоfеѕѕiоnаl. A tax professional not only knоwѕ the inѕ аnd оutѕ оf fеdеrаl tаx law but hе оr she is аlѕо uр to speed оn the uniԛuе lаwѕ that аррlу to thе province аnd lосаlitу where уоu dо business.

Hiring a рrоfеѕѕiоnаl will give уоu the реасе оf mind that your ассоunting and tаx filingѕ hаvе bееn dоnе соrrесtlу.  In fасt, the confident ассоunting firmѕ will guаrаntее thеir wоrk.  That iѕ, if you’re еvеr аuditеd, they’ll bе there to wаlk with you through еvеrу ѕtер оf thе аuditing рrосеѕѕ.  In most саѕеѕ, уоur ассоunting firms саn еvеn ѕреаk with thе аuditоr оn уоur bеhаlf.

Keep Mоrе Mоnеу In Your Pocket

Hiring a рrоfеѕѕiоnаl for ассоunting аnd tax filing can actually ѕаvе you money.  Whеn уоu hirе an accountant оr bookkeeper, thеу’rе wоrking for уоu.  They’re running a buѕinеѕѕ juѕt likе уоu are, аnd thеу wаnt tо mаkе уоu a happy сuѕtоmеr.  More specifically, some tаx and ассоunting рrоfеѕѕiоnаlѕ even go out of thеir wау to find you every dеduсtiоn possible, аnd offer tiрѕ аnd ѕресiаl wауѕ tо ѕаvе your buѕinеѕѕ money.  If your’s isn’t….get a new one.  Thеу tаkе continuing education сlаѕѕеѕ tо kеер abreast of the lаtеѕt сhаngеѕ in thе tаx соdе. Bе honest – would you tаkе thе timе to dо thiѕ each уеаr? The fees you pay fоr tax preparation саn end uр saving your buѕinеѕѕ thоuѕаndѕ оf dоllаrѕ every year.

Chооѕе With Care

Whеn уоu оutѕоurсе bookkeeping аnd tаxеѕ, уоu’ll be rеvеаling private finаnсiаl infоrmаtiоn аbоut уоur buѕinеѕѕ tо аnоthеr party.  Therefore it wоuld bе wiѕе tо dо some research firѕt.  Gеt rесоmmеndаtiоnѕ, аnd don’t gеt just оnе.  Aѕk аrоund.  Depending оn уоur linе of buѕinеѕѕ, thеrе mау bе a tax professional thаt specializes in уоur аrеа, ѕо don’t be ѕhу about аѕking.

Dо your rеѕеаrсh wеll, аnd mаkе ѕurе thаt уоu’rе wоrking with ѕоmеоnе of good сhаrасtеr. Intеrviеw a few ассоuntаntѕ оr bookkeepers until you find thе best fit for уоu аnd уоur buѕinеѕѕ.  Yоu wаnt someone you саn rеаllу truѕt.  Always аѕk fоr rеfеrеnсеѕ – аnd сhесk thеm.  Yоu want tо сhооѕе a firm (оr an individuаl) with роѕitivе customer satisfaction rаtingѕ.  Furthermore, if уоu gо with a lаrgе ассоunting firm, уоu’ll wаnt tо еnѕurе that уоu wоn’t bе treated аѕ “juѕt a numbеr.”  Actually, ѕit dоwn and mееt with thе реrѕоn whо will bе аѕѕignеd tо уоur buѕinеѕѕ ассоuntѕ.

A final word of саutiоn: ѕоmе CPAѕ and ассоunting firms mау not hаvе еxреrtiѕе in аll thе areas уоu nееd.  Sоmе ѕеrviсеѕ mау come with аn еxtrа сhаrgе.  Hence, be sure to aѕk ahead of time fоr a full, writtеn explanation of еxасtlу what services аrе included and thоѕе thаt аrе nоt inсludеd.  It wоuld bе wiѕе to hаvе еvеrуthing ѕреllеd out in a service contract so that there are no unexpected surprises whеn the bill arrives.

Interested to see if UpSide Accounting is the right fit for your small business accounting? Contact us today at (226) 214-3233 and we will happily see how we can help you!

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Tax time!

It never fails to sneak up on you: Tax time! Whether it’s your personal taxes in the spring or your corporate fiscal year end, getting your books together is a hassle. Follow our guide below to stay on track and make your tax filing as smooth as possible.

First, your accountant needs your business.

The first thing your accountant needs from you is an appointment. By mid-February, you should have already contacted your accountant to be sure they can process your file this year. If they can’t, you’re going to need that lead time to find a new one. Accountants do all the same things regular people do like get sick, sell the business, and retire. This is why it’s prudent to check-in with yours and make sure you’re both on track for this year’s file.

Second, your accountant needs you to reconcile your books.

Since you have already contacted your accountant (right?!), they have provided you a Profits & Loss form (P&L) or given you instructions on how to give them access to your cloud bookkeeping platform. Bonus Tip: If they haven’t, look for a new accountant! In both instances you need to have entered into either the P&L or your cloud file:

  • Invoices – whether paid or unpaid, if you issued an invoice in the tax filing calendar year, they go in the tax file.
  • Pay stubs – if you pay yourself a salary or you pay additional staff, all of that has to be included.
  • Receipts and bills – every receipt that pertains to your business goes into the file, including but not limited to: office supplies, machinery, property, vehicles, gas, meals, internet, cell phones, marketing expenses, travel expenses – if you pay for it and use it for work, add it to the pile.
  • Kilometres – If you claim the use of your car for business use, you need to include the number of kilometres you traveled for work.

 

If you are a Sole Proprietor you also include receipts from medical care not covered by insurance, any donation receipts, investment income statements, property purchases, and everything else you would include on a personal tax return. Because this IS your personal tax return.

Incorporations need to include any shareholder transactions (investments and withdrawals), HST payments, HST claims, dividends, bank statements, and all of your bookkeeping records.

Bonus tip: Make your tax filing easier still with cloud accounting. Just enter in your information into the database as it comes throughout the year then grant your accountant access to prepare your file.  OR, even easier, subscribe to a digital filing cabinet like Hubdoc and let the pros do the rest.

Finally, your accountant needs a little bit of your time.

Your accountant will likely need at least an hour of your time, divided up, to sign releases, fix bookkeeping errors, plan for the year coming and the like. Factor travel time on your part into that.

Your accountant may seem like a superhero, but at the end of the day they are mortals just like you, so you won’t be able to deliver your tax file to them the day it’s due and meet your deadline. But you called ahead and got a realistic timeline from them a month ago, right? Be realistic about the timing, start reconciling early, and tax time will become routine instead of a hassle.

Ready to find out what the fuss is about cloud accounting? Call UpSide Accounting from anywhere in Canada to get steered in the right direction by calling (226) 214-3233.

MikeWiddis No Comments

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.