Does a small business really need help from an accountant to file their tax return?

By Jenny Okonkwo

Last Updated: March 10, 2015

Arguments against (“Waste of Money”)

•User-friendly software packages widely available
•Cost-saving self-sufficiency imperative in a small business
•Little perceived added value
•Ultimate responsibility remains with the business owner
•.. AND OTHERS

Arguments for (“Keep out of jail”, “Saving time”)

•Compliance assurance
•Collating business records is time-consuming, especially isolating charges from utility bills in the context of current regulations
•Full cost recognition minimizes tax liability
•Technical advice and guidance on which software package product (web or desktop?), organization of electronic business record retention
•Interfacing with the CRA
•Inconvenience of time away from core business activity
•Cross-over with other personal taxation submissions (pensions, other businesses and sources of income)
•.. AND OTHERS

The simple answer lies in another set of questions:

•Could you reduce your tax liability by more than the accounting charge?
•What is the opportunity cost of your time out of the business – can you afford it?
•What are the financial consequences of late/incorrect submission or incomplete records?

We hope these general pointers will be of use to you in making what is of course a highly personal decision.

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How Connected Are You to Your Personal Brand Statement?

Written by Jenny Okonkwo

As professionals we are all empowered (and perhaps constrained!) by adherence to our core personal values. Of course the transition into an independent consultant provides an opportunity to fully embed those values into personal branding. But in truth all of us as interview candidates face much the same challenge.

In an economy where there are too many people chasing too few opportunities, we all recognize and understand the importance of an elevator pitch, 30 second infomercials, engaging social media, etc.

To a degree, crafting a set of words for a personal brand statement may be the easy part. The real challenge is ensuring that our actions reflect the messaging.

What do I mean by this?

In order to acquire high value, long-term consulting engagements, I needed to establish a vision match with like-minded business problem owners. I wanted to emphasise change, action, energy so it was no accident that I named my business ‘Transform Consulting’ with a strapline of ‘minimizing financial risk to maximize commercial opportunity’.

Here’s the background:

1. ‘Transform’: this came from being recognized as a Specialist in creating ‘something from ‘nothing’, significantly improving existing departments or processes to meet business goals and objectives. Examples are: (i) the creation and staffing of a Global Project Office, to reduce risk and regain financial control of a $multi-million systems initiative (ii) Producing 8 years of fully reconciled, audit-ready financial statements for a Tax Voluntary Disclosure business client, from just several shoeboxes of random manual receipts.

2. ‘Consulting’: my problem solving approach is widely acknowledged as being of a consultative nature. Put simply, no single person ever has all the answers. Where stakeholder input is shared and a consensus reached, a more robust, permanent solution is achieved overall (e.g. the implementation of an Email Marketing Solution as part of an overall e-CRM strategy for a leading insurance firm)

3. ‘Minimizing financial risk’: As an expert in Finance Process Improvement in both large and small companies, people know me for the ability to quickly detect and squeeze out waste, duplication of effort and inefficiencies. This has resulted in significant cost savings for my clients (improving customer invoicing accuracy for a market leader in Business Aviation)

4. ‘Maximizing commercial opportunity’. By re-engineering of critical day to day processes, I have helped companies free up back office capacity to provide greater support to the front office e.g. Sales and Marketing. This leads to people development and role expansion in exploring and analyzing new ways to grow the business (e.g. transforming a team of ‘number crunchers’ to ‘decision catalysts’ for a global brewer)

So there it is. Think of all those examples of compelling, dependable, trusted and well-known brands we know, love and respect. Why? They all have one thing in common. Strong brand equity created from the fact that they do what they say and stand by what they do.

Here are some tips for creating your Personal Brand Statement:

1. For each attribute you choose to mention, be confident you can back it up when asked to elaborate
2. The words should convey the passion in what you do, as well as the skills and expertise
3. Think of well-known brands that resonate with you and ask yourself why
4. Use the thought process from Point 3 to help you craft your own message
5. Think ‘quality’not ‘quantity’. Overly long brand statements will be difficult for others to remember
6. Ensure your branding message is consistent across all Social Media platforms
7. Test the accuracy of your message by asking for feedback from your network
8. As the nature of your business or career changes, check that your brand message remains on target
9. The brand statement should reflect your personality

So…the question is: how connected are you to your personal brand statement? What’s your view? Do you agree with the above points? What other tips and advice would you give?

Your comments are welcomed!

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10 Things to know when preparing your tax return

By Tim Cestnick

I came across this article which gives useful advice and tips to help you prepare your return:

http://www.theglobeandmail.com/globe-investor/personal-finance/tax-matters/10-things-to-know-when-preparing-your-tax-return/article2393523/

The one difference of opinion I have with the author is the comment expressed in Tip No 5 recommending the transfer of unused tuition and education credits to a parent. While this is certainly an option (it can be spouse, parent or grandparent), since the 1997 tax year, unused credits of this nature can be carried forward to future years.

Two points worthy of note;

The carry forward tuition fee cannot be transferred to any other person in future years

A student cannot hold on to these amounts for future years without reporting them in the same year for which the student received Form T2202.

Depending on the circumstances, why might a carry-forward be a good option?

The excess tuition and education credits can be offset at a future time when the student completes their studies and enters the job market. Depending on the size of the credits carried forward, they may be eligible for a significant refund in their first year of full-time employment.

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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.

 

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12 ways to ensure no buy-in to the annual budget process

Written by Jenny Okonkwo

  • Treat it as a ‘Finance only’ chore performed once a year, purely to keep Group / Head office (located elsewhere) happy
  • Unilaterally agree how marketing and promotional spend should be treated in the financial statements
  • Don’t consult with suppliers and service providers re estimates on major overheads such as utilities – split and allocate quarterly service charges across all months
  • Exclude the Fleet department (if it applies) when calculating driver headcount and petrol card charges for the coming year
  • Take an arbitrary view on allocating sales volumes and ignore the basis / data criteria upon which Sales bonus / incentive schemes are calculated
  • Unilaterally reduce major cost of sales items (e.g. product warranty) with no insight into whether this is feasible or realistic
  • Delegate the budget process mechanics and roll out advanced planning ERP based tools to the business with no prior training or orientation
  • Stay away from a strategic business expansion planning exercise that requires a re-cut and re-allocation of the original company budget
  • Refrain from taking a leadership position in presenting and explaining the financial impact of major projects to senior management
  • Ignore major P&L variances to the budget, arising from monthly reporting of the results
  • Treat the quarterly business performance review meeting as a social event
  • Avoid preparing quarterly forecasts to identify and understand the future impact of the actual results to date.
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