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
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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, 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]

What’s new in tax for your 2017 personal tax returns

It’s that time of year again – personal tax season!   Now, there are a few things you should be aware of that may affect your 2017 tax returns…here’s a quick summary (this update is for general information purposes.  Please speak to your tax advisors for specifics regarding your personal situation):

RRSP Contributions – The deadline to make RRSP contributions that can be deducted on your 2017 tax return is March 1 this year.  Many people ask whether they should contribute to their RRSP or Tax-Free Savings Account (TFSA), and I always respond by recommending they consult with their financial advisors.  Generally, however, it is advantageous to contribute to your RRSP if you are in a high income tax bracket and expect your retirement income (when you withdraw from your RRSP) to be in a lower tax bracket.  For 2017, you can contribute 18% of your 2016 earned income to your RRSP, up to a maximum of $26,010 for 2017 (plus any unused contribution room from previous years).  The TFSA contribution room is $5500 for 2017 (plus any unused contribution room you may have from previous years – up to a cumulative total of $52,000 at the end of 2017).  TFSA contributions are not deductible, and the income earned in the TFSA is not taxable.

Child Fitness and Arts Amounts – 2016 was the last year to claim the child fitness and arts credits.  No need to keep your children’s fitness and arts program receipts for income tax purposes.

Credit for Education and Books – 2016 was also the last year to claim the education amount tax credit.  If a student has unused education credits from 2016, they can still be used in 2017 and later years.  The tuition credit amount continues to exist, which has been enhanced for certain occupational and apprenticeship programs.  A proper T2202A will be required to claim the tuition credits (students should be able to get a copy through their student account).  Check the CRA website to see which programs qualify for the enhanced credit amount.

Professionals with unbilled Work-in-Progress (WIP) – Certain professionals, such as lawyers and accountants, generally carry WIP (income that has been earned for services provided, but not yet billed at year-end) on their balance sheet.  If you had WIP at the end of the year, you could generally take a reserve to defer the income inclusion to the following year when it is billed.  Effective March 22, 2017, such professionals will need to include their year-end WIP in income.  There are transition provisions available.  Please seek guidance from your tax professionals to ensure the transition year is being reported properly on your return.

Caregiver Tax Credit Amounts – As our population ages, more and more adults are caring for their elderly parents.  If this is you, you may be entitled to claim certain additional tax credit amounts on your tax return.   Effective for 2017, the caregiver tax credit, infirm dependent tax credit and family caregiver tax credit are being replaced by a NEW Canada caregiver tax credit.  This credit is equal to 15% (Federal) of caregiver expenses incurred, up to $6,883 of expenses, and up to $9,033 of caregiver expenses incurred for your dependent spouse or child who is infirm.   This credit is reduced dollar-for-dollar when the family member’s income exceeds $16,163.

Other noteworthy items:

For those who are self-employed – Remember that you pay double the CPP premiums – 9.9% of net business income, to a maximum of $5,128 for 2017.  You will also get a CPP credit amount for half of that (the employee portion).

The combined top marginal tax rate in Ontario is 53.53% (on income over $202,800).  The highest top marginal tax rate in Canada is in Nova Scotia at 54%, while residents of Alberta, BC and Saskatchewan see the lowest top marginal rates (47-48%).

Where are those high-income earners (over $200k)?  Here are some 2015 stats from Statistics Canada:

In 2015, there were 390,000 people in Canada who earned over $200k in income (or 1.45% of all income groups), over 100,000 more people than in 2011.  The median income for all of Canada was about $34k in 2015.

More than half of the over $200k income-earners can be found in Ontario (157,450 people or 1.55% of Ontario income-earners).

Interestingly, almost 900,000 people (8.7%) earned over $100k in Ontario in 2015 (2.2million or 8.27% across Canada).

 

[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]

road over water

8 Things You Need to Know as CFO of Your Small Business

Let’s face it, as a small business owner, you wear many hats – one being that of Chief Financial Officer (CFO).  And as the CFO of your business, you are focused on strategy, planning and operating your business in a way that optimizes your profits and cash flow, and ultimately your financial value.  As CEO (Chief Executive/Operating Officer), you have the big picture vision, the dream.  But as CFO, you are the gate-keeper, the one that ensures the investment in the big picture vision is sound.

This is why I am sharing with you 8 key things that top CFO’s are concerned with to help you make better business decisions and avoid the top small business money mistakes.

  1. Revenue / Sales

The key to any business success is SALES!  No sales, no cash, no business.  So as CFO, you need to understand your sales numbers, as well as your products and target customers, so that you can recommend and take courses of action to ensure that you are going to hit/exceed your sales targets…things like return on marketing, cost of client acquisition and retention, pricing strategies and policies.  The key here is knowing your market and having a good sales and marketing system, as well as having good customer service…after all, it’s easier to get repeat business and referrals than it is new business from strangers.

  1. Vision for the Future

So many entrepreneurs operate by the seat of their pants, looking at short term gains with no real vision for the future.  While this might work in the short run, it is not a sustainable model for the long term.  The cornerstone of what I coach my clients is always to start with the end in mind, and have that end in mind when making your business decisions.  This includes having a written business plan (operational, financial and marketing/sales)…it doesn’t have to be elaborate (unless it’s required by investors/lenders), but it does need to be written down somewhere, vetted and shared with your team, and re-visited regularly.

  1. Talent Acquisition and Management

At one conference I attended, the common message I heard from all the women entrepreneurs who shared their success stories is that the key to their success was building good relationships and having a good team.  This is consistent with my research and with what big business CFO’s have shared with me personally.  You need to have the right people doing the right things with the right tools…and you need to have a system for evaluating their performance, rewarding them and retaining them.  You want a team that will challenge your ideas and strategies, to ensure that you are making the best choices for your business and your clients (and you’ll want to encourage them to do so).

  1. Risk Management

Risk management has been one of my main focus areas for over 10 years.  It is an area that is top of mind for big business CFO’s, but it is one of the most neglected areas in small and micro business.  Yet, risk is an area that can sink a small business in a heartbeat if not managed properly.  Do you know what your risks are?  They could be legal, operational, reputational, financial and credit, compliance, technology, privacy, economic or market risk.  What if something went wrong in providing a service to your client and they sued you?  What if you made a big order with a supplier and they didn’t deliver?  What if an employee was committing fraud?  Or someone was stealing your intellectual property? Or if you didn’t pay your taxes? Or if your technology failed, or someone hacked in and stole your data?  Some effective ways to manage these risks include first identifying your risks, then ensuring you have adequate and appropriate insurance, legal contracts, effective policies and procedures, and internal controls.  How does your business measure up to its risks?

  1. Governance

Along with risk management, comes governance.  Corporate governance is the system by which companies are directed and controlled. It provides the structure through which businesses set and pursue their objectives, while reflecting the context of the social, regulatory and market environments they play in.  For many small business owners, corporate governance and reporting is an afterthought…the reason being may be that many small business are not held accountable by any particular governing body, so governance and reporting takes a back seat to everything else in the business.  Why does this matter?  For one, good corporate governance strengthens a company’s reputation and risk management practices.

Not having good governance structure and practices could lead to things such as the following practices that could cause harm to others and ultimately cripple a business:

  • taking risks which have serious consequences, neglect of duty of care
  • dishonesty, withholding information, distortion of facts
  • misleading communications or advertising
  • avoiding blame or penalty or payment of compensation for wrong-doing
  • secrecy and lack of transparency and resistance to reasonable investigation
  • harming the environment or planet, people or animals
  • unnecessary waste or consumption
  • invasion of privacy or anything causing privacy to be compromised
  • conflict of interest, betrayal of trust or breaking confidentiality

As CFO of your business, the gate-keeper, you need to ensure you have good governance and reporting practices to reduce your risks.

  1. Operating Productivity

Often, cost control is a function of operational productivity.  This includes measuring how well you, your team and your assets are working for you.  What is your return on time and investments? You can look at revenues and costs as a function of time, or people (by function of sales, marketing, operations, technology, admin), or assets (particularly if you’re a capital intensive business).

  1. Profits and Cash Flow

No entrepreneur gets into business with a view of incurring losses…and it sucks when that happens.  Profits are often the driving force for creating financial value and obtaining financing.  But it’s not just revenue minus expenses…you have to also take into account depreciation and other costs indirect costs that you might not be thinking of on a regular basis, such as interest, taxes, and what you pay yourself (and YES – you should be paying yourself, just as you would for any other employee).

Even more important than profits, I think, is cash flow…you need to know what cash is coming in (receivables and collections) and going out (payables, payroll and taxes), and when, so that you can manage it effectively and ensure that you are still paying yourself, your employees  AND all the other bills.  That’s why it’s important to track, reconcile your accounts and review your cash flow at least on a monthly basis (or weekly is better) so you can make quick decisions to bring in more cash, especially if you’re facing a shortfall.  Doing so can also help identify problem areas in your business that need further investigation.

  1. Tax Planning and Optimization

As a small business owner, you have options as to how you structure your business, and what makes the most sense for you from a tax perspective…you don’t want to be paying too much tax, but also need to ensure you’re not under-reporting your income or over-deducting expenses.  Unexpected tax audit adjustments can be costly, and come with significant interest and penalties.  I’ve seen businesses go out of business because of unforeseen tax assessments.  This not only goes for income taxes, but for sales taxes and payroll taxes as well.

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How do you track and report all this?  Where do you start?  Start by working with your professional advisors… Ask your accountant questions so they can help you understand what your numbers are telling you.  Hire a business consultant – they’re trained to see and understand the big picture, analyze the situation and identify areas for improvement, as well as the solutions to implement for greater success.  If your concern is sales, hire a sales consultant or coach. Talk to your lawyer about hedging your legal risks, and to your business insurance agent to ensure you’re adequately covered.

Still not sure?  Send me an email…I’d be happy to discuss your situation to see how I can help directly or refer you to someone in my vast network of business experts (accountants, lawyers, marketing strategists, sales coaches, social media experts, web and graphic designers, content writers, technology solutions, insurance specialists, financial analysts and advisors, HR specialists, recruiters, and more!).  And check out upcoming workshops and programs than may assist you www.visionspire.ca/events

Contact Linda@visionspire.ca .

 

[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]

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.

[button link=”http://54.82.103.175/contact/” type=”big” color=”green”] Request Your Complimentary Clarity Session[/button]

 

Do You Know Where You Are?

“She turned to the sunlight And shook her yellow head,And whispered to her neighbor- -Winter is dead.”So many entrepreneurs just don’t know where they’re starting from, and end up taking inefficient and ineffective action to get to where they want to go.  For many, the first glimpse of their past year results is when they have their taxes done, which I have found in my 20 years of preparing tax returns for small businesses to be 4+ months after their year-end and into their current fiscal year.  But how can you get a good handle on your strategic action plan for a successful year if you don’t even know where you’re starting from?

That’s why I feel Step 2 – Knowing where you are now, financially, systematically and operationally, is an essential step in the process of creating your strategic action plan for success. This means you’re going to have to get organized with your financials and conduct a little internal assessment of where your are now in your business.

Once you have a good picture of your current financial situation, skills and resources, internal controls and risk management practices, you can figure out what you’re missing and need to put in place (Step 3 – Analyze the gaps between where you want to go and where you are now) in order to effectively build your action plan for how you will achieve the goals you set for your business in Step 1 of the 8 steps to create your road map to success.  (By the way, If you missed my 8 Steps to Building your Road Map to Success post, or last week’s post on Step 1 – Start with the end in mind, you can get them HERE.)

Statistics show that 85% of business failures are a result of improper organization and planning.  So why is it that so many entrepreneurs don’t have their records organized and up to date?  Some of the reasons I hear are: not enough time (and no one to help), not knowing how, and outright fear of money and finances (YIKES!).

On of my clients, Susan, recently shared with me that 2015 was her best year in a long time, that she had a lot of growth in the fall, and that a big part of that success had to do with me helping her to change her mindset about finances and understand her financial numbers in a strategy session we had back in the summer.  She had long been tracking, monitoring and using her marketing and social media metrics to gain more traffic and clients, but had fallen short of using her financial metrics effectively to grow her profits and cash flow.   As she put it, finances scared her, so she ignored them.  I helped her see that they weren’t scary at all (and in fact, they could be her best friend) and showed her how she could use her financial metrics to make more effective business decisions based on what her numbers were telling her.  So kudos to Susan for using her new knowledge and mindset to create a great year!

If you find yourself resisting the task of getting your finances up to date and organized, or if you just struggle with tracking and understanding your financial numbers, I can help.  Contact me to set up your complimentary Business Clarity Breakthrough session to discuss a strategy for success with this essential step in creating business success, and ask for my Business Management Assessment Questionnaire.

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12 things you can do before the year is through to increase your cash flow and get ready for 2016

With a few weeks left of the year, there’s still time to take some action to increase your cash flow and get organized for 2016.  Earlier today, I shared these tips with some fabulous entrepreneurs over my first annual holiday networking lunch and now I share them with you.  Here are just a few things you can do to end out your year on a positive note for your business and your bank account.

YEAR-END BUSINESS TIPS (that you can do any time of the year):

1. Look at where you are leaving money on the table.
• Take advantage of early payment discounts on payable invoices, and bulk purchase discounts (if they make sense for you)
• Take advantage of zero to low interest deferred payment options

2. Collect outstanding receivables
• Have tough money conversations with the people who are past due with paying you what they owe you
• Set up an automated payment plan – get your customers to pay your something, anything, to show they are committed to paying you for the services/goods they received from you
• Review your pricing and payment policies and procedures

3. Pre-sell, and get paid for services/goods to be delivered in the new year.
• Think of a Boxing Day/Week promotion that you can offer to pre-sell a 2016 package
• Plan your January and February time slots and get clients booked in those spots now

4. Plan 2016 with the end in mind. Think about your overall goal, where you want to play, how you will win your game, what capabilities/resources need to be in place, and what systems (including policies and processes) need to be adopted to achieve your goals. Set SMART (Specific, Meaningful, Action-oriented, Realistic, Time-bound) goals not only for the year as a whole, but chuck them down into 60-90 day periods as well.

5. Look back at 2015 and see what worked, and what didn’t, so you don’t make the same mistakes and can make improvements going into 2016. This means you have to get your year-to-date finances and accounting in order now (not April next year) since your numbers paint the picture of what has happened. Your numbers let you see the peaks and valleys of your business so you can better plan for them in 2016 – to make the valleys smaller and create more consistent (and increasing) revenues and cash flows throughout the year.

6. When looking at 2016 planning, book in your time off/vacation/self-care time first (make you the most important asset and take care of you first – afterall, if you’re out due to illness, who will run your business for you?). You’ll also want to book in your CEO/CFO strategy and reflection dates and stick to them (A reflection date is when you take the time to reflect on your business results for the last period and decide what actions to take to keep moving forward). I recommend reviewing your numbers weekly, but with deeper dive at least quarterly, giving you many more chances in the year to address issues and take necessary detours as things come up, and to be pro-active rather than reactive in your business.

YEAR-END TAX TIPS:  Most people don’t think about taxes until filing their return after the year is over. However, with various tax changes in store for us in 2016, there are a few things that you’ll want to consider BEFORE the year is done to optimize your taxes for the coming year.  Before the end of the year, to reduce your taxes for this year, you should consider:

7. Purchasing business equipment before year end – If equipment purchase is on your list to do, consider purchasing equipment before year-end instead of waiting until next year.  This allows you to accelerate your CCA (tax depreciation) claim and reduce your net income this year.

8. Paying reasonable salary to your children and spouse who are working for you
If you have kids or a partner who does work for your, pay them what they’re worth (a reasonable salary) – especially if they are in a low tax bracket. This keeps the money in the family and reduces your tax bill by legitimately splitting income.

9. Making car repairs if your car is used for business
If you use your car for business and it’s in need of repairs, and you’re looking to reduce your tax bill, consider getting those repairs done before the end of the year so you can deduct them on your 2015 tax return.

10. Making charitable donations
Charitable giving is very tax effective (giving you up to $45 tax credit on every dollar given) and you help those in need at the same time. But you must actually make the donation before the year is over. Also, one caveat I give clients, is to always check out the charity and how their dollars are spent before giving to the cause. It might sound like they’re doing good things, but when they spend 80% of the donations on administration, maybe not so much

11. Consider selling losing stocks to offset realized gains
If you have made capital gains on stocks that sold in the year, and you have some investments with accrued losses, consider selling them to offset the gains. Just be careful of the 30 day stop loss rule (where you cannot buy back the same stock you sold at a loss in the first 30 days of the sale, or the loss is denied)

12. Now that I’ve given you all these great tips, here’s the kicker…you may actually want to defer some of these tips until the new year, depending on what tax bracket you’ll be in. You’ll want to consider how the new Liberal government tax initiatives that are expected to take effect Jan 1, 2016 will impact you and plan accordingly, namely with respect to:

  • New higher taxes for personal income over $200k (Ontario combined rate will be 53.53%, now 49.53%) – if your income will be over $200k you might also consider whether you should incorporate and defer some taxes
  • A reduced tax rate for personal income between $44.7k and 89.4k (Ontario combined rate will be 20.5%, now 22%)
  • The reduced small business corporate tax rate to 11% from 9% which the new government is proposing to change/defer the 2% reduction to a later time
  • Proposed changes to what companies will be eligible for the small business deduction
  • The elimination of the Family Tax Cut
  • The elimination of UCCB and CCTB, replaced with Canada Child Benefit, which is purely income driven (payments starting in July 2016 based on 2015 income)

It’s really about knowing your numbers and what to do with them to maximize your cash flows.  So, what can you do right now, with 3 weeks left of 2015?   Estimate your 2015 income and tax liability NOW, and estimate your 2016 income and tax liability based on your 2016 plan.  Then, take action to optimize your income and tax liability between the 2 years, so you’ll know exactly what you’re paying/receiving for 2015 well in advance of filing your return – leaving you with peace of mind for tax time, and the freedom to focus all of your energy come January on running your business and creating results for 2016 in 2016.

If you would like assistance with your 2015 year-end tax strategy and with planning your 2016 vision, contact me ASAP to book your complimentary Clarity Session (a conversation whereby I help you get clarity on what to focus on in your business and the one inspired action you need to take to get going).  Limited spots available in December.  www.visionspire.ca

Helpful links:

Canadian Charities Listing – http://www.cra-arc.gc.ca/chrts-gvng/lstngs/menu-eng.html

Canadian Income Tax Estimator – http://www.taxtips.ca/calculators/canadian-tax/canadian-tax-calculator.htm

Liberal tax changes (as per their election campaign, confirmed in the Dec. 4th Throne Speech) – https://www.liberal.ca/files/2015/05/Fairness-for-the-Middle-Class.pdf