6 Big Mistakes that Small Business Owners Make that Can Lead to Struggle and Failure

In business, ignorance is not bliss. In the last three years of running my own business consulting practice and 20 years of advising small business owners, I’ve seen a trend of “mistakes” or challenges that small business owners face that cause them to struggle, and can lead to financial failure…these are mistakes I’ve made in my business as well. Most business owners are really good at their passion (their reason for starting their business), but very few have business management and finance training – they’ve never learned to run a business…I know I didn’t have that knowledge at first when I started my business, even with my seven years of business finance and accounting education and professional designation. But you don’t have to struggle like I and so many other business owners have…here are some tips to overcome the biggest small business mistakes that contribute to those struggles.

Mistake #1 – Failing to Plan

We all know the saying, if you fail to plan, plan to fail. Yet, strategic planning continues to be one of the greatest struggles for business owners. It certainly was for me when I started out. I knew I had to have a plan (I had the offer, target client and financial forecasts, but had no sales and marketing plan), but trying to work with business plan templates used to make me nauseous…that is, until I found a more intuitive approach to business planning. It starts with having a very clear vision of you business, what you offer, to whom, and WHY (WHY you’re doing your business – your mission, and WHY customers would buy from you)…I use visualization and meditation techniques to get this clarity. This is an iterative process, and while your WHY may not change much, your offers and target clients could change dramatically over the years. My only caution here is to not get caught in the planning paralysis trap…make sure you are taking action while you’re creating and refining your plans (results come from taking action and going through iterations, failing fast and getting back in the game).

Mistake #2 – No Clear Value Proposition and Ideal Client Experience / Process

The more targeted and clear you can be with who you serve and the results you create for them, the easier it will be to communicate that value and attract new high-quality clients. It’s easy to want to serve everyone, and not leave anyone out. While this “jack-of-all-trades” mindset can work for a little while, and while you determine what you’d really like to be doing, it can lead to a huge dilution in energy, focus and profits. It’s difficult to communicate your message to the masses in a way that anyone will actually hear it. It’s better to have a focused approach, targeted to a specific group…try it for 90 days…if it doesn’t produce the results you’re looking for, target a different group with a message designed to reach them. Again, this is an iterative process.

Mistake #3 – Not Tracking and Reviewing Financials on a Regular Basis

Most business owners are not trained and educated on organizing, tracking and understanding their financial numbers. In fact, less than 30% of business owners have a good understanding of what their numbers are telling them (couple this with the fact that 85% of business failures are a result of poor financial organization and know-how, it’s no surprise that so many businesses fail). Yet, the numbers tell the story of how the business is doing and can highlight problem areas that need to be addressed. As a micro or small business owner, at a minimum you’ll want to review sales, gross margins, major expenses that you can control the most, and profit margins. You’ll also want to look at balance sheet items such as accounts receivable (how much, from who and how long have they been outstanding), accounts payable (how much, when are they due), and balances in your bank accounts. Review your numbers on a regular basis (monthly is best), and get help to truly understand what your numbers are telling you.

Mistake #4 – Not Paying Yourself Enough

This is one of my favorite things to work on with clients. The traditional business model has been to pay the owner last, with whatever is left in profits after operating expenses. When you follow this model, you’re likely to get paid a lot less than you’d like (or not at all). While working with one client, he figured he was only paying himself $2 an hour for his efforts…you wouldn’t work for anyone else for less than minimum wage, so why work for yourself for such low pay. I like to take a bottom-up approach to paying yourself first and determining what sales you need to support what you want that pay to be.  Here’s how: determine what you’d like to pay yourself (based on your personal needs and lifestyle), layer in taxes, desired business profits and estimated operating costs, to determine what your revenues and prices should be. This approach works really well for service-based entrepreneurs, and I’ve developed a whole empowered pricing course to teach this method [email me for more info].

Mistake #5 – Trying to do it ALL Yourself

Some business coaches may say that you should turn your greatest weaknesses into your greatest strengths. However, this is not what 7+ figure business owners do…they capitalize on their strengths, recognize their weaknesses, and build a ROCKSTAR team to get done what needs to be done in the most efficient way possible.  Often we feel as entrepreneurs, we need to do it all ourselves/be jack of all trades…this can work if your goal/intent is to be a practitioner for life (i.e., steady contract work), BUT, if you want to grow and scale your business successfully, you need a good team to support you.

Getting help and building a team doesn’t have to mean hiring full-time employees, but it does mean you have to think about all the different functions in your business, what is within your zone of genius, and what makes sense to outsource. Create hiring criteria (whether hiring consultants or employees) and make it a priority to outsource and delegate what is not your genius so you can focus more on what you do best, knowing that the rest will be properly taken care of.

Mistake #6 – Not having a Governance and Risk Management Plan

Most small businesses have no governance/risk management plan, yet it is one of the most important aspects of business success. Governance and risk management may not be sexy, but ignoring this aspect of business could lead to business failure. Just think about what would happen to your business if you had a significant negative tax audit, or legal action from a customer or employee, or experience a major illness or disability. It’s necessary to identify all your risk areas (legal, tax, employee, operations, economic, health, political, social, technology, business interruption, etc.) along with potential costs should the risk materialize, then implement protocols for managing and mitigating those risks within your risk appetite.

The bottom line is, when you have a clear vision for your business, supported with systems, structure, protocols and people to help you achieve your true potential, all the pieces start to fall into place…and you’ll have more ease, confidence, peace and harmony in your business and its possibilities.

These are all areas that I work with my clients to overcome and create a strategic business roadmap for success, while working on shifting their mindsets and relationship with money and the financial side of their business. I invite you to book a discovery call with me to discuss your challenges in business and what actions you could take right away to overcome them. I also welcome you to join the CFO Mentoring community on Facebook to support you in being the CFO of your business and your life!

Simple Steps to Start Organizing Your Business Finances

In Canada, the tax filing deadline for self-employed individuals and their spouse is June 15 (but taxes payable are due April 30th).   The biggest reason I get for clients deferring to the last minute to file (or filing late) is the lack of organization of their receipts.  Here are some tips to get you organized and tracking your finances regularly:
1 – Choose how you’re going to track your financial transactions (ledger book, spreadsheet, MINT, Money Tracker, WAVE accounting, Quickbooks, SAGE or other bookkeeping software) – I personally use a combination of WAVE (for personal), Quickbooks (for my business) and Excel (for cash flow planning)
2 – Depending on the method of tracking, download an app to your phone to scan receipts (I have WAVE Receipts for my personal expenses and HUBDOC for business receipts that links to QB)
3 – Make a date with yourself every single week, for an hour, to scan your receipts and update your finances, balance your checkbook if you will.

4 – Keep receipts and invoices organized either in electronic folders by transaction type, stapled/matched to your credit card/bank statement or in paper format in a tabbed binder.

If you follow these 4 steps alone, even if you don’t understand the numbers, at least everything will be complete an organized for your accountant come tax time, and you won’t have to wait for the last week of the filing deadline, nor incur costly late-filing penalties due to disorganization. Hey, you may even file early and knock one more thing off your list to stress about!

If you need help getting organized with your finances, I can help or connect you with someone else who can.  Send me an email Linda@visionspire.ca
________________________________
[author] [author_image timthumb=’on’]http://54.82.103.175/wp-content/uploads/2017/12/IMG_0012-resize-square.jpg[/author_image] [author_info]Linda Spencer is a CPA, CA, Canadian Tax Specialist, Business Planning Consultant and Money Mindfulness Coach. Her mission is to eliminate the stress and anxiety you experience around money and taxes, by empowering you with the know-how and mindsets to improve your business success and financial wellness, so you can have more harmony, joy and abundance in your life. [/author_info] [/author]

So you missed the tax filing deadline, now what?

April 30 has come and gone, and we accountants have survived another personal tax season in Canada.  But we’re not done yet – the deadline for self-employed individuals is June 15, and some other taxpayers may not have been concerned about meeting the April 30th deadline.

Taxpayer:  I know I’m getting a refund (or don’t owe any tax), and I haven’t filed my return yet.  Do I still need to file my tax return?

YES! Here’s why:
1) Your refund is your money…as long as you don’t file your income tax return to claim that refund, and it’s sitting with the Receiver General, you’re giving them an interest-free loan with your money.  Also, note that CRA has limitations on how far back they can issue refunds.  The CRA will only issue a refund if you file your tax return within 3 years of when it is due (i.e., by April 30, 2018 for your 2014 income tax return).  For returns with refunds owing beyond that time (up to 10 years late), you may still get your refund (or at least have it applied to taxes owing in other years) under certain circumstances and only if you apply for relief (but this is not guaranteed and up to CRA’s discretion).

2) If it turns out that you OWE taxes (either you miscalculated or CRA finds adjustments), the penalty for late-filing is 5% of the balance due, plus 1% per month that is late, plus interest.  For repeat offenders (you filed late more than 2 years in a row), the penalty can be double.  That’s a huge risk to take for not filing your return on time.

3) You could be missing out on tax-free money that the government gives certain groups of taxpayers

A) GST credits for lower-income taxpayers
B) Ontario Tax benefits (or other similar provincial tax credits) relating to sales tax and rent/property tax for lower-income taxpayers
C) Canada Child Benefits for families with children under the age of 18 (all families get a minimum amount based on the number of children they have; lower-income families get more)
D) Old Age Security Guaranteed Income Supplement for low-income seniors

Most of these programs have a July to June payment period based on your prior year income tax return.  If you file late, payments will at the very least be delayed.  This can be a huge cash flow problem for lower-income families who depend on these tax benefits to supplement their basic needs.  So filing on time, or as soon as possible after the deadline, is important.  AND if you’re self-employed, these are reasons to file sooner than later, and not to wait until the June 15th filing deadline.

And if you’re not filing your tax return to claim your refunds and other tax benefits, where else are you refusing to receive money that belongs to you?  Perhaps it’s in your business, with your clients, or in your job, or from friends and family members.

If you would like assistance in claiming your refunds and tax benefits, or don’t know where to start, feel free to contact me (Linda@visionspire.ca) for a complimentary consultation.  And if I can’t help you, chances are I’ll know someone who can.

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[author] [author_image timthumb=’on’]http://54.82.103.175/wp-content/uploads/2017/12/IMG_0012-resize-square.jpg[/author_image] [author_info]Linda Spencer is a CPA, CA, Canadian Tax Specialist and Money Mindfulness Coach. With over 20years of assisting business owners with the business and tax strategies, her mission is to eliminate stress and anxiety people experience around money and taxes, by empowering them with the tools, knowledge, strategies and mindsets that will put them in the driver’s seat of their business success and financial wellness, so they can have more harmony, joy and abundance in their life. [/author_info] [/author]

Play a Game with Money

Do you regularly track your money coming in? Do you track it daily? What patterns do you see? Perhaps those patterns gave you the impression that Money is a bit elusive.

Well, if you are the least bit competitive, you could play a game with Money. Here are some games or challenges you can play using the Daily Money Tracking tool.

Game #1 – See how many non-zero money days you can have in a month…challenge yourself to have more positive money days than zero days.

Game #2 – Create a challenge for bringing in a minimum dollar amount for a number of days (ex: $1500 or more coming in at least 1 day a week).

Game #3 – Challenge yourself to beat your highest positive money day from the previous month.

Game #4 – Challenge yourself to hit your bold money goal for the month BEFORE the end of the month (ex: if you bold money goal is $10,000 for the month, set a target of hitting that goal by the 21st).

One of my clients went from completely ignoring her money to using the Daily Money Tracking tool as a game board to see how much more money she could receive each month. With a Maverick Money Archetype, she openly admits to now playing the game to win and is having fun with it!

Choose your challenge, then brainstorm all the ways that could happen. Think outside the box, and outside of your current situation. Then, once you’ve decided on a strategy, start taking consistent action – each day/each week. Be sure to track your activities and results daily so you can see what’s working and what needs adjusting.

 

[author] [author_image timthumb=’on’]http://54.82.103.175/wp-content/uploads/2017/12/IMG_0012-resize-square.jpg[/author_image] [author_info]Linda Spencer is a CPA, CA, Canadian Tax Specialist and Money Mindfulness Coach. Her mission is to eliminate the stress and anxiety you experience around money and taxes, by empowering you with the know-how and mindsets to improve your business success and financial wellness, so you can have more harmony, joy and abundance in your life.[/author_info] [/author]

Charge What You’re Worth

Why is it that women especially have a difficult time appreciating and owning the value they bring to the table – both in business and in the workplace?  A lot of it has to do with how society has taught us…we’re making progress, but we still have a long way to go.

And I’m happy to provide workshops and training programs that help women entrepreneurs stand in the truth of their value and charge what they’re worth.  Here’s how you can empower yourself and stand in the power of what you’re worth:

  1. Identify and understand the results your clients get as a result of your work.
  2. Know what your time is worth to you.
  3. Gain clarity on what sets you apart from the rest – what makes you unique.
  4. Shift your mindsets and adopt an empowering pricing paradigm.
  5. Stop charging for your time…instead, charge for the value you deliver.
  6. People NEED you, and you playing small (discounting your value) is a huge disservice to them.
  7. PRACTICE stating your fees and unique value until it becomes as easy as saying “pass the salt”.

 

“Doubts and fears are normal, but they don’t define our value” (Casey Brown)
Here’s a great Ted Talk on defining and communicating what you’re worth.

 

[author] [author_image timthumb=’on’]http://54.82.103.175/wp-content/uploads/2017/06/Linda-Spencer-Visionspire-cropped.jpg[/author_image] [author_info]Linda Spencer is a CPA, CA, Canadian Tax Specialist and Money Mindfulness Coach. Her mission is to eliminate stress and anxiety people experience around money and taxes, by empowering them with the tools, knowledge, strategies and mindsets that will put them in the driver’s seat of their business success and financial wellness, so they can have more harmony, joy and abundance in their life.[/author_info] [/author]

How Farming Prepared Me for Entrepreneurship

I spent the first 19 years of my life on a beef farm with my loving parents and 3 younger siblings in the Eastern Townships (QC).  It was a lot of hard work (and hardship) and simply our way of life.  Never once did I think of it as a business, with plans and strategies, and committed action to get desired results…until after I myself became an entrepreneur.  Even though I had years of education and training in accounting and finance, I realize now that growing up on a farm was likely some of the best training I could have for running my own business.  Here’s why:

1 – Farming takes dedication, resiliency and hard work, and a love for that way of life…it’s not for the faint of heart.  I feel the same for entrepreneurship.

2 – Farming requires a lot of planning and strategic action to achieve desired results in the timelines afforded by the changing seasons.  Running a successful business requires knowing your markets, having clear plans and taking strategic action to get the results you know are possible.

3 – You can’t run a farm successfully on your own – as in business, you need a good team.

4 – As a farmer, you need to build great relationships with your suppliers, your customers and your team members that fully support you in achieving your success.  This same is true in business.

5 – My family really loves what they do and puts so much love into caring for the land and each of the animals on their farm.  This love and compassion was instilled in me, and as an entrepreneur, I really care for my clients.  I love serving them and seeing the joy on their faces as a result of their transformations and the results they’ve realized from working with me. 

6 – Farming is a 24/7 job (at least the kind of farming we did)…you could be up before the sun and not get to bed until the wee hours of the morning (especially if it’s birthing season or maple season).  As an entrepreneur, I eat, breathe and sleep my business.  It’s an integral part of me, and often has me up into the wee hours of the night (especially when I’m in creative mode).

7 –  As a farmer, you need to be prepared for life’s curve balls (uncooperative weather, sick animals, illness, injury, economic set-backs, influences beyond your control) – having back up plans, risk management systems, and a good support system are essential to handling those curve balls with ease and grace.  These are also essential for success in business.

8 – Growing up, we had to make do with what we had.  That meant being really resourceful, thinking outside the box and finding solutions that required little to no money.  If it meant rolling up our sleeves, getting our hands dirty (and worn), and creating something out of nothing, we did it.  I’m finding this has become a great skill in the beginning stages of my business.

9 – My dad never seemed to stress if things didn’t go so well on the farm.  Sometimes SH*t happens – it is what it is…no point stressing over it…just assess the situation, learn from it, find a better solution and move on.  I’ve had many challenges in starting and growing my business.  Thankfully, I adopted my dad’s outlook on dealing with those challenges…otherwise I likely would have given up and gone back to a full-time job long ago.

10 – In farming, you really need good tracking systems and processes – whether it’s for your cash flow or your animal inventory (I saw my dad, and now my brother, tracking the cows and money almost daily – perhaps this is where I adopted my love and propensity for numbers, and why I became an accountant).  As an entrepreneur, you really have to know your numbers (sales, marketing analytics, financials, etc.) and what they’re telling you so you can make the right decisions for you and your business.

So there you have it – 10 ways that farming prepared me for running my own business…and I never really acknowledged or appreciated them until just recently.

So what about you?  What skills did you acquire from your childhood that maybe you haven’t acknowledged or appreciated until now? I would love to hear about them…leave your comments below.

If you would like to chat about how I can help you with growing your business, CLICK HERE to book a complimentary clarity call.

Getting Comfortable with Money

The more comfortable you get with Money, the more you empower yourself.

I hear many people say they don’t pay attention to their finances because it stresses them out (likely a huge factor behind today’s low financial literacy rates).  One of the reasons for this stress is that they don’t know what to look at or what to do.

Let me tell you a story to shift this perspective.

I have a client who, 9 months ago, had this same perception of money – it was stressful.  She never looked at her numbers, and as long as her debit card worked, she felt everything was ok.  Her husband took care of all the finances (and the stress of dealing with it).  He balanced her books for her and took care of their personal money matters for which she had no awareness or interest.

Then she heard me speak about having a relationship with Money (instead of treating it like just a thing, or a “necessary evil”), which completely shifted her perception and way of being with Money.  She started paying attention to it, understanding it, and looking for ways to bring more money in.

This client recently told me that she now looks at her numbers daily, has gone to her bank about reducing fees and asking about investments (something she had zero knowledge of 9 months ago), and is becoming her own money “guru”.

This new “relationship” with money has empowered her beyond her imagination (and beyond her husband’s imagination) – giving her more confidence in her business and in her relationships, and resulting in greater ease for her business and her family.

Money is the #1 factor causing stress in North America, but it doesn’t have to be.  When you shift your perceptions, and pay attention to your finances, ask questions and learn more about them, you WILL become empowered to take INSPIRED action to build your net worth.

What actions will you take today to empower yourself with money and finance?

 

[author] [author_image timthumb=’on’]http://54.82.103.175/wp-content/uploads/2017/06/Linda-Spencer-Visionspire-cropped.jpg[/author_image] [author_info]Linda Spencer brings 20 years of professional accounting and tax knowledge to her more recent accreditation as a Certified Money, Marketing & Soul Coach. Through her money mindset and profitability workshops, group training programs, guest speaking and 1-1 coaching, she helps heart centered business owners transform their relationship with money & finance (reducing their money stress), so they can do more of what they love with greater ease and joy. If you would like to be more empowered to create the business (and life) you imagine, with Money as your PARTNER, Linda can help. Contact her for a no-obligation 30 minute complimentary Clarity Call to learn what your next steps should be. [/author_info] [/author]

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Are You Ready For a Tax Audit?

Are you at risk? The Canada Revenue Agency (CRA) continues to audit the following key areas, as these areas seem to be the ones of greatest error or non-compliance by small and medium sized businesses:

Denied expenses – CRA denies unsupported and non-deductible expenses. It is important to have proper and adequate documentation to support the expenditures.
Taxable benefits – CRA scrutinizes automobile benefits and other expenses such as travel expenses and phone and internet usage to ensure taxable benefits are attributed properly to employees.
Shareholder benefits – CRA continues to seek out personal expenses paid for and deducted by the business that should be denied or taxed to the shareholder. Taxpayers should carefully document the business purpose of all expenses and have practices in place to closely monitor shareholder accounts and credit cards to avoid these reassessments.
International compliance / cross-border transactions – Many business are unaware of the tax and reporting implications of conducting business outside of their country and engaging in certain financing transactions outside of Canada, including sales taxes, payroll and employee withholdings, and corporate tax reporting implications. For Canada and the US, there is information sharing and new processes at boarder security to more closely scrutinize cross-border business travel.
Sales & commodity taxes (or Indirect taxes) – There have been a lot of changes in the sales tax rules in Canada over the last few years, with significant changes affecting large businesses, cross-border transactions, pensions, and financial institutions. Many businesses are unaware of how these changes affect them. The CRA also continues to find and disallow ITC claims for expenditures with inadequate or improper documentation.
Non-arm’s length transactions – Whether domestic or international, if there is insufficient proof/documentation for the validity of the transaction between non-arm’s length parties (such as management or administration fees), the expense can be denied (but yet, the income still taxed in to the other party – resulting in double taxation).
Aggressive tax planning/schemes – Aggressive tax planning and abusive tax avoidance schemes are a global concern. The CRA has invested millions in its program to reduce aggressive tax planning or abusive tax avoidance schemes that contravene specific anti-avoidance provisions of the law. The CRA now has the tools to detect, correct and deter the non-compliance of taxpayers using aggressive tax plans, and there will likely be more audit activity in this area.
As part of this scrutiny, the CRA has recently sent notice that it will be increasing its audits of individuals who have claimed business or property losses. If you do receive an audit request letter or request for information, don’t sit on it or stick it in a drawer somewhere hoping it will go away or take care of itself (yes, people do this). Take the letter immediately to your accountant or tax advisor to assist you in dealing with it.

Not dealing with the CRA requests in timely manner can cost you hundreds or thousands or even more in additional taxes, interest and penalties, which can cripple a small business. But CRA auditors are people too – just doing their job, serving you, the taxpayer, as their client. You may have done everything correctly, or you may have made honest mistakes (CRA audits can be a great opportunity to learn and boost your tax management controls and practices). But be prepared. Talk to your accountant and ask them what your risks are and how you can reduce them.

[author] [author_image timthumb=’on’][/author_image] [author_info]Linda Spencer is a CPA, CA, Canadian Tax Specialist and Money, Marketing & Soul business coach. Her mission is to eliminate stress and anxiety around money and taxes, by empowering heart-centered small business owners with the tools, knowledge, strategies and mindsets to put them in the driver seat of their financial success and wellness.[/author_info] [/author]

Gearing up for Tax Season

It’s that time of year again – Tax Season, and while some people are eager to get their taxes done early, many stress and wait until the last minute (or later) to get their tax return filed. So, how can you better prepare yourself for this coming tax season?

  1. Be aware of the changes in tax law that may affect you. In Canada, the changes that were made in the last year relating to the 2016 personal tax year include:
  • Children’s arts credit – The maximum eligible fees per child (excluding the supplement for children with disabilities) has been reduced to $250 for 2016. This credit will be eliminated for 2017 and later years.
  • Children’s fitness tax credit – The maximum eligible fees per child (excluding the supplement for children with disabilities) has been reduced to $500 for 2016. This credit will be eliminated for 2017 and later tax years.
  • Home accessibility expenses – You can claim a maximum of $10,000 for eligible expenses you incurred for work done or goods acquired for an eligible dwelling.
  • Family tax cut – The family tax cut (allowing income split allocation of up to $50,000 for families with children) has been eliminated for 2016 and later years.
  • Eligible educator school supply tax credit – If you were an eligible educator, you can now claim up to $1,000 for eligible teaching supplies expenses.
  • Canada Child Benefits (CCB) – 2015 was the last year of the Universal Child Care Benefit (UCCB). As of July 2016, the non-taxable CCB has replaced the Canada child tax benefit (CCTB), the national child benefit supplement (NCBS), and the universal child care benefit (UCCB). You may have received taxable UCCB payments up to June 2016 that you would have to include in your 2016 income tax return.
  • Sale of principal residence – Starting in 2016, the sale of a principal residence must now be reported on your tax return in the year of sale, along with any principal residence designation. Under proposed changes, the CRA will be able to accept a late designation in certain circumstances, but a penalty may apply.
  • Reassessment period – Under proposed legislation, for tax years that end after October 2, 2016, the CRA may at any time reassess your income tax return if you fail to report a sale or other disposition of real estate. So make sure you report those real estate sales, including the sale of your own house.

 

  1. Open your mail as it comes in and keep separate file folders if you have a lot of different types of slips. Every year I get clients who bring in their tax slips in unopened envelopes.  First, I wonder why they wouldn’t open their mail (What if the information on the slip is incorrect, or if it’s the wrong slip altogether? Or what if it’s a request that needs a response by a certain date?)  Keep like slips together. I recommend keeping separate file folders for different types of slips/receipts (such as charitable donation receipts, T4 slips, T3 slips, T5 slips, RRSP slips, medical receipts).  Please note that most slips will have been sent out to you by February 28th, but some (like T3 slips for mutual fund and trust investments) are not due until the end of March.  You can always log in to your online account with CRA to check for missing T-slips.

 

  1. Have all your tax documents and support in order. If you are self-employed (i.e., you run your business as a sole proprietor), or have interest in a partnership or rental property, gather, organize and summarize all your transactions into categories and put them in a spreadsheet (or on a piece of paper, or in a bookkeeping program such as QuickBooks or Freshbooks).  Accountants and tax preparers really do not enjoy getting a shoe box or grocery bag full of disorganized slips…and it can add a significant amount to your accounting bill since it does take time to go through them and verify with you the business purpose and category of expenditure they relate to.  The same goes for your revenue invoices and receipts.  The more you can organize and summarize yourself, the more efficient (and less costly) the process of getting your tax return completed and filed.

 

  1. Keep your business transactions and documentations separate from your personal documents. Always keep a separate business bank account, and if you make business purchases by credit card, I recommend keeping a separate card just for business purchases and don’t use it for personal items. It’s easy to get things mixed up, but the mistake of claiming personal expenses as business expenses can be a costly one when faced with a tax adjustment or audit.

 

  1. If you use your vehicle for business or work, keep a log of your business and total km’s travelled. If you don’t already keep a log, you’ll need some way of documenting and supporting your business usage claimed in your tax return.

 

  1. 6. Get your taxes done early. The deadline to file and pay your Canadian personal tax return is April 30th, without incurring penalties and interest on any amounts due.  If you are self-employed, June 15th is the filing deadline (but the tax payment due date remains April 30th).

 

The information reported in your tax return is ultimately your responsibility, not your accountant’s.  Therefore you should at least be aware of the rules that apply to you, so that you are comfortable signing off on your return before it’s filed.

 

Here are some helpful links to find further information:

For individuals – http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/menu-eng.html

For small business owners and self-employed individuals – http://www.cra-arc.gc.ca/tx/bsnss/sm/menu-eng.html

I also love taxtips.ca for their tools and calculators.

If you have a specific tax or business question you want answered, or would like assistance with your income tax return, feel free to send me a direct email at Linda@visionspire.ca.

You may also want to attend my upcoming workshop in Georgetown, ON on March 22, 2017 – Tax Essentials for Small Business, where I will be showing you essential tips and best practices regarding income tax and GST/HST compliance for small business in Canada.

 

[author] [author_image timthumb=’on’]ca/wp-content/uploads/2017/03/Visionspire-Linda-Spencer-Ontario-quote.jpg[/author_image] [author_info]Linda Spencer is a CPA, CA, Canadian Tax Specialist and Money, Marketing & Soul business coach. Her mission is to eliminate stress and anxiety around money and taxes, by empowering heart-centered small business owners with the tools, knowledge, strategies and mindsets to put them in the driver seat of their financial success and wellness.[/author_info] [/author]

12 Ways to Optimize Your Cash Flows and Taxes Before the Year is Through

Most entrepreneurs aren’t thinking about their 2016 taxes this month, but they should be…there are some things you need to do before December 31 to take advantage of certain deductions and tax credits for your 2016 tax return.  And, it’s also a good time to have a boost in your cash flows.  Here are 12 tips:

Increase Your Cash Flows

  1. Want a boost in your cash flows this last month of the year?Look at where you are leaving money on the table – it could be outstanding receivables, over-delivering on your services, not following up on leads (how awesome would it be to book another client or two just before Christmas?!).
  • While you’re at it, why not review your payment policies…maybe a change is required such that you’re getting paid in advance or at the very least on the day of service (that way you don’t have to worry about chasing those receivables after the fact).
  • Now is also a good time to review your pricing strategies to make sure your charging for value.  Now would be a good time to notify your clients of price increases that will take effect in January.

 

2.  Consider accelerating purchases for your business.

As a business owner, you probably have a good idea of the things you need for your business.  If you want to get the deduction from your income this year, purchase items you need in your business on credit in December and pay for them in January when your credit card is due.  This way you’ll get the tax deduction this year but defer the cash outlay until next year.

  1. Pre-sell packages/services/goods to be delivered in the new year.

‘Tis the season for giving, so why not offer an incentive for people to pre-order goods and services and pay for them now, that they’ll receive in the new year.  Examples could be taking custom orders for your goods for future delivery, offering gift certificates for clients to give to their loved ones that they can use in the new year, offer savings/bonuses to pre-sell a program/course/workshop that will take place in the new year.

4.  If you haven’t already done so, now is a good time to look at your 2017 plan.  When you have clarity in where you’re going, and align your actions to achieve that, you’re telling the Universe that you’re open and ready to receive.  That receiving may even happen sooner than you think.  Going back to my previous point – when you have clarity of your 2017 goals/targets/plan, you can decide which offers to promote and pre-sell now.

When you’re planning for the new year, plan with the end in mind and ask these key strategy questions:

    • What is your overall vision, purpose and goal?
    • Where will you play (play where your target clients are)?  How will you become more visible and build your audience?
    • How will you hit/exceed your targets?  What will  you offer, at what price? How/when will you get paid? What are you marketing/sales strategies? How will you know you’re on track?  What are your back up plans?
    • What capabilities/resources need to be in place to support that?
    • What management systems need to be adopted and implement to support that?

 

Optimize your 2016 taxes

So now you’ve injected some extra cash into your bank before year-end, the year would not be complete without thinking about how to optimize your taxes.  Here are some tax-saving tips that you’d need to consider doing before year-end.

  1.  Maximize your CCA (tax depreciation) claims.

Purchase business equipment before year-end to accelerate the capital cost allowance (CCA) deduction by one year.  For most equipment purchases, you get 1/2 the CCA deduction in the year of purchase.  So if you purchase in Dec 2016, you get 1/2 the year’s CCA in 2016, then a full year’s worth in 2017.  If you wait until early 2017 to make the purchase, you only get 1/2 the year’s CCA in 2017, even though you’ve been using it for almost a full year.   Again, buy them on credit and pay later, allowing your to get the deduction in 2016, but defer the cash outlay to 2017.

2.  Keep cash in the family and reduce your taxes.

Pay a reasonable salary to your kids/partner for actual work they do for you (this is a form of acceptable income splitting).  You get the deduction, and the income should be picked up in their income tax return for the year, presumably at a lower tax rate than yours.  But, also beware of additional tax compliance and amounts you have to remit (such as CPP contributions and completing T4’s).

3.  Maximize your car expenses.

If you use your car for business, and you know you’re car is in need of service and repairs (perhaps new winter tires?), make those necessary car repairs before year-end to get the deduction in your 2016 income (in proportion to your business use of your car).  While you’re at it, update your mileage log to track all your business km’s.

4.  Maximize the Canada Education Savings Grant (CESG) for the year by making your RESP contributions prior to December 31.

If you have kids under the age of 18, the Canadian government give you a grant on the RESP contributions made for your kids’ post-secondary education.  The grant is 20% of the RESP contributions, to a maximum of $500 on $2500 of contributions made in the calendar year.  Now is the time to top up your RESP contributions to take advantage of the maximum available CESG for the year.  There are additional grants available for low income families and kids with disabilities.

5.  Maximize your RRSP contributions.

Assuming no carry-over room or pension adjustments, you can contribute 18% of your earned income for the previous year to your RRSP in 2016 (to a maximum of $25,370 for 2016 contributions).  Many people wait to top up their RRSP contributions until February.  However, there are a few instances where it would make more sense to do so before the end of the year.

    • If you’re nearing retirement, and make spousal RRSP contributions, consider that if you wait until Jan/Feb 2017 to make those contribution, your spouse will not be eligible to withdraw them until 2020.  Making the contribution in 2016 accelerates the eligible spousal withdrawal to 2019.
    • As a tax free savings vehicle, if you’re 18 or older, you can make after-tax contributions to a Tax Free Savings Account (TFSA).  The maximum contribution for 2016 is $5500 (like RRSP’s, the unused contribution room gets carried forward and available to you in future years).  If you’re planning to make a withdrawal from your TFSA, do it now instead of waiting until January – that way your withdrawal is added back to your contribution limit for 2017 (otherwise you have to wait until 2018 to be eligible to add it back into your TFSA).

6.  Maximize your medical tax credits.

Medical and dental expenses incurred in the year can only be claim if paid in 12 month period (claim period) that ends on or before December 31.  So, you’ll want to pay those outstanding medical expenses/prescription refills/dental bills before year-end to maximize your claim for 2016.

7.  Optimize your charitable donations tax credits.

Total charitable donations in excess of $200 made in the year can give a higher tax credit (approximately 40% in Ontario) than your marginal income tax rate, giving  you a net benefit on your tax return.  But, the donations have to be made in on or before December 31 in order to be claimed on your 2016 tax return. So if you’re planning on giving, December is a great month to give.

8.  If you have unregistered investments which are giving you taxable gains in the year, consider selling stocks with accrued losses to offset realized gains for the year to reduce your taxable income.  Also, consider paying investment related expenses before year-end in order to get the deduction for this year against your investment income.

 

So there you have it – 12 ways to increase your cash flow and optimize your taxes for 2016.  Of course, these are general statements – each person’s situation is different and must be considered carefully before making decisions that will affect your taxes and cash flow, taking in to account the specifics of your situation.  I would suggest you speak to your accountant/tax advisor/investment advisor to be sure you’re making the best choices for your unique situation.  I’m happy to assist as well – contact me and request your complimentary clarity session to see how I may help.

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