6 Stress Busting Tips for Self Employed Business Owners

Written by Jenny Okonkwo

For many small businesses, the income tax filing process is an overly complicated, time consuming process due to the following reasons:

Poor Record Keeping

What cannot be supported or proved, gets added back to taxable income. Incomplete records is probably the No 1 reason why in many cases, small businesses may be parting with more of their hard earned income than they need to.

Limited Cash Management/Expenses Tracking

Small businesses often do not have the time or capacity for consistent cash monitoring. Poor record keeping is likely to leave them exposed to higher income tax liabilities which become a challenge to settle without adequate funds. Also, at the end of the tax year, it becomes a ‘guessing game’ as to how best to categorize and allocate the expenses.

No Budgeting and Forecasting Processes

The use of budgets and forecasts help to profile a business in terms of targeted revenues and expenses. They could be useful as a basis for helping to validate the completeness and accuracy of the actual books and records as a basis for tax calculations.

Lack of month end procedures

Month end procedures encourage a level of organization in maintaining the business books and records. The result is cleaner book-keeping to ensure the correct transactions are posted in the corresponding period in the accounts.

Here are some suggested actions to alleviate some of the pain during the tax filing process:

  1. Move away from the ‘Shoebox’. Develop a filing system  so that you are able to immediately access invoices, expense documents, store till expense chits / receipts, bank and credit statements by month
  2. Watch the Cash. Aim to have your suppliers on longer payment schedules than your customers if at all possible. Who wants to take out a loan to pay their taxes?? Open a separate bank account and put aside the HST / Income tax estimate of your revenue as you receive it
  3. Introduce month-end procedures. As mentioned above, this will force you to improve your record keeping
  4. Build a yearly budget, and flex it monthly, based on what actually happened. This will help you to stay on track with expenses and highlight areas that require urgent action
  5. Buy in the expertise for ‘x’ days per month to help you get organized with the above responsibilities which then allows you to focus on the core activities of your business
  6. Separate your personal and professional expenditure. Use a separate bank account and dedicated credit cards for your business, for easier tracking of revenue and expenses.

Despite the above, some of you may choose to stick with the ‘Shoebox Method’ of managing your business finances. If so, may I recommend that you install some type of  ‘navigation system’….that way, come tax time, you’ll actually know where the Shoebox is!

If you are spending too much time away from your main business activity to manage your accounting and record-keeping tasks,  contact me for a free consultation on how we can reduce your workload and lower your costs, jenny@transform-consulting.ca or 647 838 9606.

 

About Jenny Okonkwo

A MESSAGE TO VICE PRESIDENTS IN FINANCE You know how you are continuously frustrated with trying to balance external compliance requirements with supporting the business internally? I solve this. I do this by using my natural talent for detecting and eliminating waste, duplication, inefficiencies. Documenting procedures, streamlining business processes to help define and clarify roles and responsibilities. Automating manual outdated systems, designing and implementing new ways of working, analysing business data to improve decision making. I help companies develop and improve the internal controls over their financial reporting by assisting in the delivery of Sarbanes Oxley (SOX 404) readiness programs. This allows focus to be placed on compliance and knowing that internal business is taken care of, helping to minimize financial risk to maximize commercial opportunity. Even though I am an accountant by trade, I’ll always be a problem solver at heart, which is shown here. I’m always looking for a new problem to solve, so if you’ve got a doozy you need a hand with, feel free to contact me directly at 647 838 9606 or drop me a line at jenny@transform-consulting.ca I have also helped local business entrepreneurs and sole proprietors prepare their voluntary disclosure applications, computerize their manual accounting systems, remove their record-keeping backlogs, automate their processes using both cloud based and desktop accounting solutions, prepare their personal and corporate tax returns. Join my LinkedIn Group now to brainstorm and collaborate from any of these perspectives. Connect with me on Twitter and Linkedin.
This entry was posted in Tax Talk and tagged , , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s